E-Commerce
Richard Warner
CompuServe v. Cyber Promotions
962 F. Supp. 1015 (S.D. Ohio 1997)
Graham, District Judge.
This case presents novel issues regarding the commercial use of the Internet,
specifically the right of an online computer service to prevent a commercial
enterprise from sending unsolicited electronic mail advertising to its subscribers.
Plaintiff CompuServe Incorporated ("CompuServe") is one of the major
national commercial online computer services. It operates a computer
communication service through a proprietary nationwide computer network. In
addition to allowing access to the extensive content available within its own
proprietary network, CompuServe also provides its subscribers with a link to the
much larger resources of the Internet. This allows its subscribers to send and
receive electronic messages, known as "e-mail," by the Internet. Defendants
Cyber Promotions, Inc. and its president Sanford Wallace are in the business of
sending unsolicited e-mail advertisements on behalf of themselves and their clients
to hundreds of thousands of Internet users, many of whom are CompuServe
subscribers. CompuServe has notified defendants that they are prohibited from
using its computer equipment to process and store the unsolicited e-mail and has
requested that they terminate the practice. Instead, defendants have sent an
increasing volume of e-mail solicitations to CompuServe subscribers. CompuServe
has attempted to employ technological means to block the flow of defendants' email transmissions to its computer equipment, but to no avail.
This matter is before the Court on the application of CompuServe for a
preliminary injunction which . . . would . . . prevent defendants from sending
unsolicited advertisements to CompuServe subscribers.
For the reasons which follow, this Court holds that where defendants
engaged in a course of conduct of transmitting a substantial volume of electronic
data in the form of unsolicited e-mail to plaintiff's proprietary computer equipment,
where defendants continued such practice after repeated demands to cease and
desist, and where defendants deliberately evaded plaintiff's affirmative efforts to
protect its computer equipment from such use, plaintiff has a viable claim for
trespass to personal property and is entitled to injunctive relief to protect its
property.
I.
. . . Internet users often pay a fee for Internet access. However, there is
no per-message charge to send electronic messages over the Internet and such
messages usually reach their destination within minutes. Thus electronic mail
provides an opportunity to reach a wide audience quickly and at almost no cost to
the sender. It is not surprising therefore that some companies, like defendant
Cyber Promotions, Inc., have begun using the Internet to distribute advertisements
by sending the same unsolicited commercial message to hundreds of thousands of
Internet users at once. Defendants refer to this as "bulk e- mail," while plaintiff
refers to it as "junk e-mail." In the vernacular of the Internet, unsolicited e-mail
advertising is sometimes referred to pejoratively as "spam."1
CompuServe subscribers use CompuServe's domain name
"CompuServe.com" together with their own unique alpha-numeric identifier to form
a distinctive e-mail mailing address. That address may be used by the subscriber
to exchange electronic mail with any one of tens of millions of other Internet users
who have electronic mail capability. E-mail sent to CompuServe subscribers is
processed and stored on CompuServe's proprietary computer equipment.
Thereafter, it becomes accessible to CompuServe's subscribers, who can access
CompuServe's equipment and electronically retrieve those messages.
Over the past several months, CompuServe has received many complaints
from subscribers threatening to discontinue their subscription unless CompuServe
prohibits electronic mass mailers from using its equipment to send unsolicited
advertisements. CompuServe asserts that the volume of messages generated by
such mass mailings places a significant burden on its equipment which has finite
processing and storage capacity. CompuServe receives no payment from the mass
mailers for processing their unsolicited advertising. However, CompuServe's
subscribers pay for their access to CompuServe's services in increments of time and
thus the process of accessing, reviewing and discarding unsolicited e-mail costs
them money, which is one of the reasons for their complaints. CompuServe has
notified defendants that they are prohibited from using its proprietary computer
equipment to process and store unsolicited e-mail and has requested them to cease
and desist from sending unsolicited e-mail to its subscribers. Nonetheless,
defendants have sent an increasing volume of e-mail solicitations to CompuServe
subscribers.
In an effort to shield its equipment from defendants' bulk e-mail,
CompuServe has implemented software programs designed to screen out the
messages and block their receipt. In response, defendants have modified their
equipment and the messages they send in such a fashion as to circumvent
CompuServe's screening software. Allegedly, defendants have been able to
conceal the true origin of their messages by falsifying the point-of-origin
information contained in the header of the electronic messages. Defendants have
removed the "sender" information in the header of their messages and replaced it
This term is derived from a skit performed on the British television show Monty
Python's Flying Circus, in which the word "spam" is repeated to the point of
absurdity in a restaurant menu.
1
2
with another address. Also, defendants have developed the capability of
configuring their computer servers to conceal their true domain name and appear
on the Internet as another computer, further concealing the true origin of the
messages. By manipulating this data, defendants have been able to continue
sending messages to CompuServe's equipment in spite of CompuServe's protests
and protective efforts.
Defendants assert that they possess the right to continue to send these
communications to CompuServe subscribers. CompuServe contends that, in doing
so, the defendants are trespassing upon its personal property. . .
IV.
This Court will now address the second aspect of plaintiff's motion in which it
seeks to enjoin defendants Cyber Promotions, Inc. and its president Sanford
Wallace from sending any unsolicited advertisements to any electronic mail address
maintained by CompuServe.
CompuServe predicates this aspect of its motion for a preliminary injunction
on the common law theory of trespass to personal property or to chattels, asserting
that defendants' continued transmission of electronic messages to its computer
equipment constitutes an actionable tort.
The Restatement § 217(b) states that a trespass to chattel may be
committed by intentionally using or intermeddling with the chattel in possession of
another. Restatement § 217, Comment e defines physical "intermeddling" as
follows:
... intentionally bringing about a physical contact with the chattel. The actor
may commit a trespass by an act which brings him into an intended physical
contact with a chattel in the possession of another[.]
Electronic signals generated and sent by computer have been held to be sufficiently
physically tangible to support a trespass cause of action. Thrifty-Tel, Inc., v.
Bezenek, 46 Cal.App.4th 1559, 1567, 54 Cal.Rptr.2d 468 (1996); State v. McGraw,
480 N.E.2d 552, 554 (Ind.1985) (Indiana Supreme Court recognizing in dicta that a
hacker's unauthorized access to a computer was more in the nature of trespass
than criminal conversion); and State v. Riley, 121 Wash.2d 22, 846 P.2d 1365
(1993) (computer hacking as the criminal offense of "computer trespass" under
Washington law). It is undisputed that plaintiff has a possessory interest in its
computer systems. Further, defendants' contact with plaintiff's computers is clearly
intentional. Although electronic messages may travel through the Internet over
various routes, the messages are affirmatively directed to their destination.
Defendants, citing Restatement (Second) of Torts § 221, which defines
"dispossession", assert that not every interference with the personal property of
another is actionable and that physical dispossession or substantial interference
with the chattel is required. Defendants then argue that they did not, in this case,
physically dispossess plaintiff of its equipment or substantially interfere with it.
However, the Restatement (Second) of Torts § 218 defines the circumstances under
which a trespass to chattels may be actionable:
One who commits a trespass to a chattel is subject to liability to the
possessor of the chattel if, but only if,
(a) he dispossesses the other of the chattel, or
(b) the chattel is impaired as to its condition, quality, or value, or
(c) the possessor is deprived of the use of the chattel for a substantial time,
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or
(d) bodily harm is caused to the possessor, or harm is caused to some
person or thing in which the possessor has a legally protected interest.
Therefore, an interference resulting in physical dispossession is just one
circumstance under which a defendant can be found liable. . . .
A plaintiff can sustain an action for trespass to chattels, as opposed to an
action for conversion, without showing a substantial interference with its right to
possession of that chattel. Thrifty-Tel, Inc., 46 Cal.App.4th at 1567, 54 Cal.Rptr.2d
468 (quoting Zaslow v. Kroenert, 29 Cal.2d 541, 176 P.2d 1 (Cal.1946)). Harm to
the personal property or diminution of its quality, condition, or value as a result of
defendants' use can also be the predicate for liability. Restatement § 218(b).
An unprivileged use or other intermeddling with a chattel which results in
actual impairment of its physical condition, quality or value to the possessor
makes the actor liable for the loss thus caused. In the great majority of
cases, the actor's intermeddling with the chattel impairs the value of it to the
possessor, as distinguished from the mere affront to his dignity as possessor,
only by some impairment of the physical condition of the chattel. There may,
however, be situations in which the value to the owner of a particular type of
chattel may be impaired by dealing with it in a manner that does not affect
its physical condition.... In such a case, the intermeddling is actionable even
though the physical condition of the chattel is not impaired.
The Restatement (Second) of Torts § 218, comment h.
In the present case, any value CompuServe realizes from its computer
equipment is wholly derived from the extent to which that equipment can serve its
subscriber base. . . . handling the enormous volume of mass mailings that
CompuServe receives places a tremendous burden on its equipment. . . .
Defendants' more recent practice of evading CompuServe's filters by disguising the
origin of their messages commandeers even more computer resources because
CompuServe's computers are forced to store undeliverable e-mail messages and
labor in vain to return the messages to an address that does not exist. . . . To the
extent that defendants' multitudinous electronic mailings demand the disk space
and drain the processing power of plaintiff's computer equipment, those resources
are not available to serve CompuServe subscribers. Therefore, the value of that
equipment to CompuServe is diminished even though it is not physically damaged
by defendants' conduct.
Next, plaintiff asserts that it has suffered injury aside from the physical
impact of defendants' messages on its equipment. Restatement § 218(d) also
indicates that recovery may be had for a trespass that causes harm to something in
which the possessor has a legally protected interest. Plaintiff asserts that
defendants' messages are largely unwanted by its subscribers, who pay
incrementally to access their e-mail, read it, and discard it. Also, the receipt of a
bundle of unsolicited messages at once can require the subscriber to sift through, at
his expense, all of the messages in order to find the ones he wanted or expected to
receive. These inconveniences decrease the utility of CompuServe's e-mail service
and are the foremost subject in recent complaints from CompuServe subscribers. . .
. CompuServe received approximately 9,970 e-mail complaints from subscribers
about junk e- mail, a figure up from approximately two hundred complaints the
previous year. . . . Approximately fifty such complaints per day specifically
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reference defendants. . . . Defendants contend that CompuServe subscribers are
provided with a simple procedure to remove themselves from the mailing list.
However, the removal procedure must be performed by the e-mail recipient at his
expense, and some CompuServe subscribers complain that the procedure is
inadequate and ineffectual. . . .
Many subscribers have terminated their accounts specifically because of the
unwanted receipt of bulk e-mail messages. . . . Defendants' intrusions into
CompuServe's computer systems, insofar as they harm plaintiff's business
reputation and goodwill with its customers, are actionable under Restatement §
218(d).
The reason that the tort of trespass to chattels requires some actual damage
as a prima facie element, whereas damage is assumed where there is a trespass to
real property, can be explained as follows:
The interest of a possessor of a chattel in its inviolability, unlike the similar
interest of a possessor of land, is not given legal protection by an action for
nominal damages for harmless intermeddlings with the chattel. In order
that an actor who interferes with another's chattel may be liable, his conduct
must affect some other and more important interest of the possessor.
Therefore, one who intentionally intermeddles with another's chattel is
subject to liability only if his intermeddling is harmful to the possessor's
materially valuable interest in the physical condition, quality, or value of the
chattel, or if the possessor is deprived of the use of the chattel for a
substantial time, or some other legally protected interest of the possessor is
affected as stated in Clause (c). Sufficient legal protection of the
possessor's interest in the mere inviolability of his chattel is afforded by his
privilege to use reasonable force to protect his possession against even
harmless interference.
Restatement (Second) of Torts § 218, Comment e (emphasis added).
Plaintiff CompuServe has attempted to exercise this privilege to protect its
computer systems. However, defendants' persistent affirmative efforts to evade
plaintiff's security measures have circumvented any protection those self-help
measures might have provided. In this case CompuServe has alleged and
supported by affidavit that it has suffered several types of injury as a result of
defendants' conduct. The foregoing discussion simply underscores that the
damage sustained by plaintiff is sufficient to sustain an action for trespass to
chattels. However, this Court also notes that the implementation of technological
means of self-help, to the extent that reasonable measures are effective, is
particularly appropriate in this type of situation and should be exhausted before
legal action is proper.
Under Restatement § 252, the owner of personal property can create a
privilege in the would-be trespasser by granting consent to use the property. A
great portion of the utility of CompuServe's e-mail service is that it allows
subscribers to receive messages from individuals and entities located anywhere on
the Internet. Certainly, then, there is at least a tacit invitation for anyone on the
Internet to utilize plaintiff's computer equipment to send e-mail to its subscribers.
Buchanan Marine, Inc. v. McCormack Sand Co., 743 F.Supp. 139 (E.D.N.Y.1990)
(whether there is consent to community use is a material issue of fact in an action
for trespass to chattels). However, in or around October 1995, CompuServe
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employee Jon Schmidt specifically told Mr. Wallace that he was "prohibited from
using CompuServe's equipment to send his junk e-mail messages." . . . There is
apparently some factual dispute as to this point, but it is clear from the record that
Mr. Wallace became aware at about this time that plaintiff did not want to receive
messages from Cyber Promotions and that plaintiff was taking steps to block receipt
of those messages. . . .
Defendants argue that plaintiff made the business decision to connect to the
Internet and that therefore it cannot now successfully maintain an action for
trespass to chattels. Their argument is analogous to the argument that because
an establishment invites the public to enter its property for business purposes, it
cannot later restrict or revoke access to that property, a proposition which is
erroneous under Ohio law. See, e.g., State v. Carriker, 5 Ohio App.2d 255, 214
N.E.2d 809 (1964) (the law in Ohio is that a business invitee's privilege to remain
on the premises of another may be revoked upon the reasonable notification to
leave by the owner or his agents); Allstate Ins. Co. v. U.S. Associates Realty, Inc.,
11 Ohio App.3d 242, 464 N.E.2d 169 (1983) (notice of express restriction or
limitation on invitation turns business invitee into trespasser). On or around
October 1995, CompuServe notified defendants that it no longer consented to the
use of its proprietary computer equipment. Defendants' continued use thereafter
was a trespass. Restatement (Second) of Torts §§ 252 and 892A(5); see also
Restatement (Second) of Torts § 217, Comment f ("The actor may commit a new
trespass by continuing an intermeddling which he has already begun, with or
without the consent of the person in possession. Such intermeddling may persist
after the other's consent, originally given, has been terminated."); Restatement
(Second) of Torts § 217, Comment g.
Further, CompuServe expressly limits the consent it grants to Internet users
to send e-mail to its proprietary computer systems by denying unauthorized parties
the use of CompuServe equipment to send unsolicited electronic mail messages. . .
. This policy statement, posted by CompuServe online, states as follows:
Compuserve is a private online and communications services company.
CompuServe does not permit its facilities to be used by unauthorized parties
to process and store unsolicited e-mail. If an unauthorized party attempts
to send unsolicited messages to e-mail addresses on a CompuServe service,
Compuserve will take appropriate action to attempt to prevent those
messages from being processed by CompuServe. Violations of
CompuServe's policy prohibiting unsolicited e-mail should be reported to....
Defendants Cyber Promotions, Inc. and its president Sanford Wallace have used
plaintiff's equipment in a fashion that exceeds that consent. The use of personal
property exceeding consent is a trespass. City of Amsterdam v. Daniel Goldreyer,
Ltd., 882 F.Supp. 1273 (E.D.N.Y.1995); Restatement (Second) of Torts § 256. It
is arguable that CompuServe's policy statement, insofar as it may serve as a
limitation upon the scope of its consent to the use of its computer equipment, may
be insufficiently communicated to potential third-party users when it is merely
posted at some location on the network. However, in the present case the record
indicates that defendants were actually notified that they were using CompuServe's
equipment in an unacceptable manner. To prove that a would-be trespasser acted
with the intent required to support liability in tort it is crucial that defendant be
placed on notice that he is trespassing.
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As a general matter, the public possesses a privilege to reasonably use the
facilities of a public utility, Restatement (Second) of Torts § 259, but Internet
service providers have been held not to be common carriers. Religious Technology
Center v. Netcom On-Line Communication Services, Inc., 907 F.Supp. 1361
(N.D.Cal.1995). The definition of public utility status under Ohio law was recently
articulated in A & B Refuse Disposers, Inc. v. Bd. Of Ravenna Township Trustees,
64 Ohio St.3d 385, 596 N.E.2d 423 (1992). The Ohio Supreme Court held that the
determination of whether an entity is a "public utility" requires consideration of
several factors relating to the "public service" and "public concern" characteristics
of a public utility. Id. 596 N.E.2d at 426. The public service characteristic
contemplates an entity which devotes an essential good or service to the general
public which the public in turn has a legal right to demand or receive. Id. at 425.
CompuServe's network, Internet access and electronic mail services are simply not
essential to society. There are many alternative forms of communication which are
customarily used for the same purposes. Further, only a minority of society at
large has the equipment to send and receive e-mail messages via the Internet, and
even fewer actually do. The second characteristic of a public utility contemplates an
entity which conducts its operations in such manner as to be a matter of public
concern, that is, a public utility normally occupies a monopolistic or ogopolistic
position in the relevant marketplace. Id. at 425-426. Defendants estimate that
plaintiff serves some five million Internet users worldwide. However, there are a
number of major Internet service providers that have very large subscriber bases,
and with a relatively minor capital investment, anyone can acquire the computer
equipment necessary to provide Internet access services on a smaller scale.
Furthermore, Internet users are not a "captive audience" to any single service
provider, but can transfer from one service to another until they find one that best
suits their needs. Finally, the Ohio Supreme Court made clear that a party
asserting public utility status is required to support that assertion with evidence
going to the relevant aforementioned factors. Id. 596 N.E.2d at 427. Defendants
have not argued that CompuServe is a public utility, much less produced evidence
tending to support such a conclusion. Therefore, CompuServe is not a public utility
as that status is defined under Ohio law and defendants can not be said to enjoy a
special privilege to use CompuServe's proprietary computer systems.
In response to the trespass claim, defendants argue that they have the right
to continue to send unsolicited commercial e-mail to plaintiff's computer systems
under the First Amendment to the United States Constitution. The First
Amendment states that "Congress shall make no law respecting an establishment of
religion, or prohibiting the free exercise thereof; or abridging the freedom of
speech, or of the press." The United States Supreme Court has recognized that
"the constitutional guarantee of free speech is a guarantee only against
abridgement by government, federal or state." Hudgens v. NLRB, 424 U.S. 507,
513, 96 S.Ct. 1029, 1033, 47 L.Ed.2d 196 (1976). Indeed, the protection of the
First Amendment is not a shield against "merely private conduct." Hurley v. IrishAmerican Gay Group of Boston, 515 U.S. 557, ----, 115 S.Ct. 2338, 2344, 132
L.Ed.2d 487 (1995) (citation omitted).
...
In the present action, CompuServe is a private company. Moreover, the
mere judicial enforcement of neutral trespass laws by the private owner of property
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does not alone render it a state actor. Rotunda & Nowak, Treatise on
Constitutional Law § 16.3, 546 (West 1992). Defendants do not argue that
CompuServe is anything other than a private actor. Instead, defendants urge that
because CompuServe is so intimately involved in this new medium it might be
subject to some special form of regulation. Defendants cite Associated Press v.
United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945), and Turner
Broadcasting Sys., Inc. v. FCC, 512 U.S. 622, 114 S.Ct. 2445, 129 L.Ed.2d 497
(1994), which stand for the proposition that when a private actor has a certain
quantum of control over a central avenue of communication, then the First
Amendment might not prevent the government from enacting legislation requiring
public access to private property. No such legislation yet exists that is applicable
to CompuServe. Further, defendants' discussion concerning the extent to which
the Internet may be regulated (or should be regulated) is irrelevant because no
government entity has undertaken to regulate the Internet in a manner that is
applicable to this action. Indeed, if there were some applicable statutory scheme
in place this Court would not be required to apply paradigms of common law to the
case at hand.
In Lloyd Corp. v. Tanner, 407 U.S. 551, 92 S.Ct. 2219, 33 L.Ed.2d 131
(1972), protestors of the Vietnam War sought to pass out written materials in a
private shopping center. Even though the customers of the shopping center were
the intended recipients of the communication, the Supreme Court held that allowing
the First Amendment to trump private property rights is unwarranted where there
are adequate alternative avenues of communication. Id. at 567, 92 S.Ct. at 2228.
The Supreme Court stated that:
Although ... the courts properly have shown a special solicitude for the
guarantees of the First Amendment, this Court has never held that a
trespasser or an uninvited guest may exercise general rights of free speech
on property privately owned and used nondiscriminatorily for private
purposes only.
Id. at 567-68, 92 S.Ct. at 2228 (emphasis added). Defendants in the present
action have adequate alternative means of communication available to them. Not
only are they free to send e-mail advertisements to those on the Internet who do
not use CompuServe accounts, but they can communicate to CompuServe
subscribers as well through online bulletin boards, web page advertisements, or
facsimile transmissions, as well as through more conventional means such as the
U.S. mail or telemarketing. Defendants' contention, referring to the low cost of the
electronic mail medium, that there are no adequate alternative means of
communication is unpersuasive. There is no constitutional requirement that the
incremental cost of sending massive quantities of unsolicited advertisements must
be borne by the recipients. The legal concept in Lloyd that private citizens are
entitled to enforce laws of trespass against would-be communicators is applicable to
this case.
Defendants assert that CompuServe has assumed the role of a postmaster,
to whom all of the strictures of the First Amendment apply, and that to allow it to
enjoy a legally protected interest in its computer equipment in this context is to
license a form of censorship which violates the First Amendment. However, such an
assertion must be accompanied by a showing that CompuServe is a state actor.
As earlier mentioned, defendants have neither specifically argued this point nor
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provided any evidence to support it. CompuServe is entitled to restrict access to
its private property.
"The First and Fourteenth Amendments have never been treated as
absolutes. Freedom of speech or press does not mean that one can talk or
distribute where, when and how one chooses." Breard v. City of Alexandria, 341
U.S. 622, 642, 71 S.Ct. 920, 932, 95 L.Ed. 1233 (1951) (upholding local ordinances
banning commercial solicitations over First Amendment objections) (footnote
omitted). In Rowan v. U.S. Post Office Dept., 397 U.S. 728, 90 S.Ct. 1484, 25
L.Ed.2d 736 (1970) the United States Supreme Court held that the First
Amendment did not forbid federal legislation that allowed addressees to remove
themselves from mailing lists and stop all future mailings. The Court stated that
the "mailer's right to communicate must stop at the mailbox of an unreceptive
addressee.... [t]o hold less would be to license a form of trespass [.]" Id. at 73637, 90 S.Ct. at 1490.
In Tillman v. Distribution Sys. Of America, Inc., 224 A.D.2d 79, 648 N.Y.S.2d
630 (1996) the plaintiff complained that the defendant continued to throw
newspapers on his property after being warned not to do so. The court held that
the defendant newspaper distributor had no First Amendment right to continue to
throw newspapers onto the property of the plaintiff. After discussing the Supreme
Court cases of Rowan and Breard, supra, the court pointed out that:
The most critical and fundamental distinction between the cases cited above,
on the one hand, and the present case, on the other, is based on the fact
that here we are not dealing with a government agency which seeks to
preempt in some way the ability of a publisher to contact a potential reader;
rather, we are dealing with a reader who is familiar with a publisher's
product, and who is attempting to prevent the unwanted dumping of this
product on his property. None of the cases cited by the defendants stands for
the proposition that the Free Speech Clause prohibits such a landowner from
resorting to his common-law remedies in order to prevent such unwanted
dumping. There is, in our view, nothing in either the Federal or State
Constitutions which requires a landowner to tolerate a trespass whenever the
trespasser is a speaker, or the distributor of written speech, who is
unsatisfied with the fora which may be available on public property, and who
thus attempts to carry his message to private property against the will of the
owner.
Id. 648 N.Y.S.2d at 635. The court concluded, relying on Lloyd, supra, that the
property rights of the private owner could not be overwhelmed by the First
Amendment. Id. 648 N.Y.S.2d at 636.
In the present case, plaintiff is physically the recipient of the defendants'
messages and is the owner of the property upon which the transgression is
occurring. As has been discussed, plaintiff is not a government agency or state
actor which seeks to preempt defendants' ability to communicate but is instead a
private actor trying to tailor the nuances of its service to provide the maximum
utility to its customers.
Defendants' intentional use of plaintiff's proprietary computer equipment
exceeds plaintiff's consent and, indeed, continued after repeated demands that
defendants cease. Such use is an actionable trespass to plaintiff's chattel. The
First Amendment to the United States Constitution provides no defense for such
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conduct.
Plaintiff has demonstrated a likelihood of success on the merits which is
sufficient to warrant the issuance of the preliminary injunction it has requested. . . .
Normally, a preliminary injunction is not appropriate where an ultimate
award of monetary damages will suffice. Montgomery v. Carr, 848 F.Supp. 770
(S.D.Ohio 1993). However, money damages are only adequate if they can be
reasonably computed and collected. Plaintiff has demonstrated that defendants'
intrusions into their computer systems harm plaintiff's business reputation and
goodwill. This is the sort of injury that warrants the issuance of a preliminary
injunction because the actual loss is impossible to compute. Basicomputer Corp. v.
Scott, 973 F.2d 507 (6th Cir.1992); Economou v. Physicians Weight Loss Centers
of America, 756 F.Supp. 1024 (N.D.Ohio 1991).
Plaintiff has shown that it will suffer irreparable harm without the grant of the
preliminary injunction.
It is improbable that granting the injunction will cause substantial harm to
defendant. Even with the grant of this injunction, defendants are free to
disseminate their advertisements in other ways not constituting trespass to
plaintiff's computer equipment. Further, defendants may continue to send
electronic mail messages to the tens of millions of Internet users who are not
connected through CompuServe's computer systems.
Finally, the public interest is advanced by the Court's protection of the
common law rights of individuals and entities to their personal property. Defendants
raise First Amendment concerns and argue that an injunction will adversely impact
the public interest. High volumes of junk e-mail devour computer processing and
storage capacity, slow down data transfer between computers over the Internet by
congesting the electronic paths through which the messages travel, and cause
recipients to spend time and money wading through messages that they do not
want. It is ironic that if defendants were to prevail on their First Amendment
arguments, the viability of electronic mail as an effective means of communication
for the rest of society would be put at risk. In light of the foregoing discussion,
those arguments are without merit. Further, those subscribing to CompuServe are
not injured by the issuance of this injunction. Plaintiff has made a business
decision to forbid Cyber Promotions and Mr. Wallace from using its computers to
transmit messages to CompuServe subscribers. If CompuServe subscribers are
unhappy with that decision, then they may make that known, perhaps by
terminating their accounts and transferring to an Internet service provider which
accepts unsolicited e- mail advertisements. That is a business risk which plaintiff
has assumed.
Having considered the relevant factors, this Court concludes that the
preliminary injunction that plaintiff requests is appropriate.
Notes and Questions
1. You commit trespass to chattels by intentionally and without authorization
disposssing someone of personal property or use the property. See RESTATEMENT
(SECOND) OF TORTS § 217(b), and §§ 252 and 892(5), 217, Comment f and
Comment g). Now consider § 218, which says that you are liable for trespass to
chattels if and only if: (a) you dispossess someone of the chattel; or (b) you impair
the value of the chattel; or (c) you deprive the possessor of the use of the chattel
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for a substantial time; or (d) you cause bodily harm to the possess, or harm some
other person or thing in which the possessor has a legally protected interest.
Why does the RESTATEMENT distinguish between “committing trespass” and
“liability” for trespass? By “liability” does the RESTATEMENT mean liability for
monetary damages, or does § 218 apply to injunctions as well? The questions
become critical outside the spam e-mail context. The questions raised in (2) and
(3) below also become critical.
2. The court found that Cyber Promotions’ sending massive amounts of email to CompuServe was an intentional unauthorized use of CompuServe’s
computers, where (1) the use impaired their value even though the computers
were not physically harmed, and (2) harmed a legally protected interest
CompuServe had in those computers by causing CompuServe’s customers to
terminate their accounts and by damaging its business reputation and goodwill.
In general, what is required for an impairment of value and for a harm to an
appropriate legally protected interest?
3. The court issues an injunction against Cyber Promotions because
CompuServe demonstrated that Cyber Promotions’ unauthorized access harmed
CompuServe’s business reputation and goodwill. The court noted that an injunction
was appropriate because the actual loss would be impossible to calculate.
In general, what sort of injury, if any, is required for an injunction to issue
based on a claim of trespass to chattels?
4. Trespass to chattels is not the only legal doctrine invoked against
spammers. Cases are also brought under the Computer Fraud and Abuse Act, 18
U. S. C. 47, Sec. 1030.
eBay, Inc. v. Bidder's Edge, Inc.
100 F.Supp.2d 1058 (N.D. Cal. 2000)
Whyte, District Judge.
Plaintiff eBay, Inc.'s (“eBay”) motion for preliminary injunction was heard by the
court on April 14, 2000. . . . For the reasons set forth below, the court preliminarily
enjoins defendant Bidder's Edge, Inc. (“BE”) from accessing eBay's computer
systems by use of any automated querying program without eBay's written
authorization.
I. BACKGROUND
eBay is an Internet-based, person-to-person trading site. eBay offers sellers the
ability to list items for sale and prospective buyers the ability to search those
listings and bid on items. The seller can set the terms and conditions of the
auction. The item is sold to the highest bidder. The transaction is consummated
directly between the buyer and seller without eBay's involvement. A potential
purchaser looking for a particular item can access the eBay site and perform a key
word search for relevant auctions and bidding status. eBay has also created
category listings that identify items in over 2500 categories, such as antiques,
computers, and dolls. Users may browse these category listing pages to identify
items of interest.
Users of the eBay site must register and agree to the eBay User Agreement. Users
agree to the seven page User Agreement by clicking on an “I Accept” button located
11
at the end of the User Agreement. The current version of the User Agreement
prohibits the use of “any robot, spider, other automatic device, or manual process
to monitor or copy our web pages or the content contained herein without our prior
expressed written permission.” It is not clear that the version of the User
Agreement in effect at the time BE began searching the eBay site prohibited such
activity, or that BE ever agreed to comply with the User Agreement.
eBay currently has over 7 million registered users. Over 400,000 new items are
added to the site every day. Every minute, 600 bids are placed on almost 3 million
items. Users currently perform, on average, 10 million searches per day on eBay's
database. Bidding for and sales of items are continuously ongoing in millions of
separate auctions.
A software robot is a computer program which operates across the Internet to
perform searching, copying and retrieving functions on the web sites of others. A
software robot is capable of executing thousands of instructions per minute, far in
excess of what a human can accomplish. Robots consume the processing and
storage resources of a system, making that portion of the system's capacity
unavailable to the system owner or other users. Consumption of sufficient system
resources will slow the processing of the overall system and can overload the
system such that it will malfunction or “crash.” A severe malfunction can cause a
loss of data and an interruption in services.
The eBay site employs “robot exclusion headers.” A robot exclusion header is a
message, sent to computers programmed to detect and respond to such headers,
that eBay does not permit unauthorized robotic activity. Programmers who wish to
comply with the Robot Exclusion Standard design their robots to read a particular
data file, “robots.txt,” and to comply with the control directives it contains.
To enable computers to communicate with each other over the Internet, each is
assigned a unique Internet Protocol (“IP”) address. When a computer requests
information from another computer over the Internet, the requesting computer
must offer its IP address to the responding computer in order to allow a response to
be sent. These IP addresses allow the identification of the source of incoming
requests. eBay identifies robotic activity on its site by monitoring the number of
incoming requests from each particular IP address. Once eBay identifies an IP
address believed to be involved in robotic activity, an investigation into the identity,
origin and owner of the IP address may be made in order to determine if the
activity is legitimate or authorized. If an investigation reveals unauthorized robotic
activity, eBay may attempt to ignore (“block”) any further requests from that IP
address. Attempts to block requests from particular IP addresses are not always
successful.
. . . Blocking queries . . . is both inefficient, because it creates an endless game of
hide-and-seek, and potentially counterproductive, as it runs a substantial risk of
blocking requests from legitimate, desirable users . . .
BE . . . does not host auctions. BE is an auction aggregation site designed to offer
on-line auction buyers the ability to search for items across numerous on-line
auctions without having to search each host site individually. As of March 2000,
the BE web site contained information on more that five million items being
auctioned on more than one hundred auction sites. BE also provides its users with
additional auction-related services and information. The information available on
the BE site is contained in a database of information that BE compiles through
12
access to various auction sites such as eBay. When a user enters a search for a
particular item at BE, BE searches its database and generates a list of every item in
the database responsive to the search, organized by auction closing date and time.
Rather than going to each host auction site one at a time, a user who goes to BE
may conduct a single search to obtain information about that item on every auction
site tracked by BE. It is important to include information regarding eBay auctions
on the BE site because eBay is by far the biggest consumer to consumer on-line
auction site. . . .
In early 1998, eBay gave BE permission to include information regarding eBayhosted auctions for Beanie Babies and Furbies in the BE database. In early 1999,
BE added to the number of person-to-person auction sites it covered and started
covering a broader range of items hosted by those sites, including eBay. On April
24, 1999, eBay verbally approved BE crawling the eBay web site for a period of 90
days. The parties contemplated that during this period they would reach a formal
licensing agreement. They were unable to do so.
It appears that the primary dispute was over the method BE uses to search the
eBay database. eBay wanted BE to conduct a search of the eBay system only when
the BE system was queried by a BE user. This reduces the load on the eBay system
and increases the accuracy of the BE data. BE wanted to recursively crawl the eBay
system to compile its own auction database. This increases the speed of BE
searches and allows BE to track the auctions generally and automatically update its
users when activity occurs in particular auctions, categories of auctions, or when
new items are added.
In late August or early September 1999, eBay requested by telephone that BE
cease posting eBay auction listings on its site. BE agreed to do so. In October
1999, BE learned that other auction aggregations sites were including information
regarding eBay auctions. On November 2, 1999, BE issued a press release
indicating that it had resumed including eBay auction listings on its site. On
November 9, 1999, eBay sent BE a letter reasserting that BE's activities were
unauthorized, insisting that BE cease accessing the eBay site, alleging that BE's
activities constituted a civil trespass and offering to license BE's activities. eBay
and BE were again unable to agree on licensing terms. As a result, eBay
attempted to block BE from accessing the eBay site; by the end of November,
1999, eBay had blocked a total of 169 IP addresses it believed BE was using to
query eBay's system. BE elected to continue crawling eBay's site by using proxy
servers to evade eBay's IP blocks.
Approximately 69% of the auction items contained in the BE database are from
auctions hosted on eBay. BE estimates that it would lose one-third of its users if it
ceased to cover the eBay auctions.
The parties agree that BE accessed the eBay site approximate 100,000 times a day.
eBay alleges that BE activity constituted up to 1.53% of the number of requests
received by eBay, and up to 1.10% of the total data transferred by eBay during
certain periods in October and November of 1999. . . .
II. LEGAL STANDARD
To obtain preliminary injunctive relief, a movant must demonstrate “either a
likelihood of success on the merits and the possibility of irreparable injury, or that
serious questions going to the merits were raised and the balance of hardships tips
sharply in its favor.” Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510, 1517
13
(9th Cir.1992) (citations omitted). The alternatives in the above standard
represent “extremes of a single continuum,” rather than two separate tests.
Benda v. Grand Lodge of Int'l Ass'n of Machinists & Aerospace Workers, 584 F.2d
308, 315 (9th Cir.1978). “The critical element in determining the test to be applied
is the relative hardship to the parties. If the balance of harm tips decidedly toward
the plaintiff, then the plaintiff need not show as robust a likelihood of success on
the merits as when the balance tips less decidedly.” Alaska v. Native Village of
Venetie, 856 F.2d 1384, 1389 (9th Cir.1988). A “serious question” is one on which
the movant has a “fair chance of success on the merits.” Sierra On-Line, Inc. v.
Phoenix Software, Inc., 739 F.2d 1415, 1421 (9th Cir.1984). Generally, the
“balance of harm” evaluation should precede the “likelihood of success analysis”
because until the balance of harm has been evaluated the court cannot know how
strong and substantial the plaintiff's showing of the likelihood of success must be.
See Village of Venetie, 856 F.2d at 1389.
III. ANALYSIS
A. Balance of Harm
eBay asserts that it will suffer four types of irreparable harm if preliminary
injunctive relief is not granted: (1) lost capacity of its computer systems resulting
from to BE's use of automated agents; (2) damage to eBay's reputation and
goodwill caused by BE's misleading postings; (3) dilution of the eBay mark; and
(4) BE's unjust enrichment. The harm eBay alleges it will suffer can be divided into
two categories. The first type of harm is harm that eBay alleges it will suffer as a
result of BE's automated query programs burdening eBay's computer system
(“system harm”). The second type of harm is harm that eBay alleges it will suffer
as a result of BE's misrepresentations regarding the information that BE obtains
through the use of these automated query programs (“reputational harm”).
. . . Since eBay does not move independently or alternatively for injunctive relief
tailored toward the alleged reputational harm, the court does not include the
alleged reputational harm in the balance of harm analysis, nor does the court
address the merits of the causes of action based on the alleged reputational harm
in the likelihood of success analysis.
According to eBay, the load on its servers resulting from BE's web crawlers
represents between 1.11% and 1.53% of the total load on eBay's listing servers.
eBay alleges both economic loss from BE's current activities and potential harm
resulting from the total crawling of BE and others. . . .
eBay's allegations of harm are based, in part, on the argument that BE's activities
should be thought of as equivalent to sending in an army of 100,000 robots a day
to check the prices in a competitor's store. This analogy, while graphic, appears
inappropriate. Although an admittedly formalistic distinction, unauthorized robot
intruders into a “brick and mortar” store would be committing a trespass to real
property. There does not appear to be any doubt that the appropriate remedy for
an ongoing trespass to business premises would be a preliminary injunction. See
e.g., State v. Carriker, 5 Ohio App.2d 255, 214 N.E.2d 809, 811-12 (1964)
(interpreting Ohio criminal trespass law to cover a business invitee who, with no
intention of making a purchase, uses the business premises of another for his own
gain after his invitation has been revoked); General Petroleum Corp. v. Beilby, 213
Cal. 601, 605, 2 P.2d 797 (1931). More importantly, for the analogy to be
accurate, the robots would have to make up less than two out of every one-
14
hundred customers in the store, the robots would not interfere with the customers'
shopping experience, nor would the robots even be seen by the customers. Under
such circumstances, there is a legitimate claim that the robots would not pose any
threat of irreparable harm. However, eBay's right to injunctive relief is also based
upon a much stronger argument.
If BE's activity is allowed to continue unchecked, it would encourage other auction
aggregators to engage in similar recursive searching of the eBay system such that
eBay would suffer irreparable harm from reduced system performance, system
unavailability, or data losses. BE does not appear to seriously contest that reduced
system performance, system unavailability or data loss would inflict irreparable
harm on eBay consisting of lost profits and lost customer goodwill. Harm resulting
from lost profits and lost customer goodwill is irreparable because it is neither
easily calculable, nor easily compensable and is therefore an appropriate basis for
injunctive relief. See, e.g., People of California ex rel. Van De Kamp v. Tahoe Reg'l
Planning Agency, 766 F.2d 1316, 1319 (9th Cir.1985). Where, as here, the denial
of preliminary injunctive relief would encourage an increase in the complained of
activity, and such an increase would present a strong likelihood of irreparable harm,
the plaintiff has at least established a possibility of irreparable harm.
In the patent infringement context, the Federal Circuit has held that a preliminary
injunction may be based, at least in part, on the harm that would occur if a
preliminary injunction were denied and infringers were thereby encouraged to
infringe a patent during the course of the litigation. See Atlas Powder Co. v. Ireco
Chemicals, 773 F.2d 1230, 1233 (Fed.Cir.1985). In the absence of preliminary
injunctive relief, “infringers could become compulsory licensees for as long as the
litigation lasts.” Id. The Federal Circuit's reasoning is persuasive. “The very nature
of the patent right is the right to exclude others.... We hold that where validity and
continuing infringement have been clearly established, as in this case, immediate
irreparable harm is presumed. To hold otherwise would be contrary to the public
policy underlying the patent laws.” Smith Int'l, Inc. v. Hughes Tool Co., 718 F.2d
1573, 1581 (Fed.Cir.1983) (footnotes omitted). Similarly fundamental to the
concept of ownership of personal property is the right to exclude others. See
Kaiser Aetna v. United States, 444 U.S. 164, 176, 100 S.Ct. 383, 62 L.Ed.2d 332
(1979) (characterizing “the right to exclude others” as “one of the most essential
sticks in the bundle of rights that are commonly characterized as property”). If
preliminary injunctive relief against an ongoing trespass to chattels were
unavailable, a trespasser could take a compulsory license to use another's personal
property for as long as the trespasser could perpetuate the litigation.
BE correctly observes that there is a dearth of authority supporting a preliminary
injunction based on an ongoing to trespass to chattels. In contrast, it is black
letter law in California that an injunction is an appropriate remedy for a continuing
trespass to real property. See Allred v. Harris, 14 Cal.App.4th 1386, 1390, 18
Cal.Rptr.2d 530 (1993) (citing 5 B.E. Witkin, Summary of California Law, Torts §
605 (9th ed.1988)). If eBay were a brick and mortar auction house with limited
seating capacity, eBay would appear to be entitled to reserve those seats for
potential bidders, to refuse entrance to individuals (or robots) with no intention of
bidding on any of the items, and to seek preliminary injunctive relief against noncustomer trespassers eBay was physically unable to exclude. The analytic difficulty
is that a wrongdoer can commit an ongoing trespass of a computer system that is
15
more akin to the traditional notion of a trespass to real property, than the
traditional notion of a trespass to chattels, because even though it is ongoing, it will
probably never amount to a conversion. The court concludes that under the
circumstances present here, BE's ongoing violation of eBay's fundamental property
right to exclude others from its computer system potentially causes sufficient
irreparable harm to support a preliminary injunction.
BE argues that even if eBay is entitled to a presumption of irreparable harm, the
presumption may be rebutted. The presumption may be rebutted by evidence that
a party has engaged in a pattern of granting licenses to engage in the complained
of activity such that it may be reasonable to expect that invasion of the right can be
recompensed with a royalty rather than with an injunction, or by evidence that a
party has unduly delayed in bringing suit, thereby negating the idea of
irreparability. See Polymer Technologies, Inc. v. Bridwell, 103 F.3d 970, 974
(Fed.Cir.1996) (discussing presumption of irreparable harm in patent infringement
context). BE alleges that eBay has both engaged in a pattern of licensing
aggregators to crawl its site as well as delayed in seeking relief. For the reasons
set forth below, the court finds that neither eBay's limited licensing activities nor its
delay in seeking injunctive relief while it attempted to resolve the matter without
judicial intervention are sufficient to rebut the possibility of irreparable harm.
If eBay's irreparable harm claim were premised solely on the potential harm caused
by BE's current crawling activities, evidence that eBay had licensed others to crawl
the eBay site would suggest that BE's activity would not result in irreparable harm
to eBay. However, the gravamen of the alleged irreparable harm is that if BE is
allowed to continue to crawl the eBay site, it may encourage frequent and
unregulated crawling to the point that eBay's system will be irreparably harmed.
There is no evidence that eBay has indiscriminately licensed all comers. Rather, it
appears that eBay has carefully chosen to permit crawling by a limited number of
aggregation sites that agree to abide by the terms of eBay's licensing agreement.
“The existence of such a [limited] license, unlike a general license offered to all
comers, does not demonstrate a decision to relinquish all control over the
distribution of the product in exchange for a readily computable fee.” Ty, Inc. v.
GMA Accessories, Inc., 132 F.3d 1167, 1173 (7th Cir.1997) (discussing
presumption of irreparable harm in copyright infringement context). eBay's
licensing activities appear directed toward limiting the amount and nature of
crawling activity on the eBay site. Such licensing does not support the inference
that carte blanche crawling of the eBay site would pose no threat of irreparable
harm.
eBay first learned of BE in late 1997 or early 1998 when BE sought to retain the
same public relations firm used by eBay. This motion was filed on January 18,
2000. An unexplained delay of two years would certainly raise serious doubts as
the irreparability of any alleged harm. See Playboy Enters., Inc. v. Netscape
Communications Corp., 55 F.Supp.2d 1070, 1090 (C.D.Cal.1999) (noting that delay
of as little as 60 days to three months has been held sufficient to rebut the
presumption of irreparable harm). Here, the circumstances establish that any
delay resulted from eBay's good faith efforts to resolve this dispute without judicial
intervention and do not rebut a finding of the possibility of irreparable harm.
In April 1999, eBay agreed to allow BE to crawl the eBay site for 90 days while the
parties negotiated a license. In late August or early September 1999, after the
16
parties had failed to negotiate a license, eBay requested that BE stop crawling the
eBay site, and BE complied. It was not until November 2, 1999, that BE issued a
press release indicating that it had resumed including eBay auction listings on its
site. In response, on November 9, 1999, eBay sent BE a letter again informing BE
that its activities w
After eBay and BE were again unable to agree on licensing terms, eBay attempted
to block BE from accessing the eBay site. By the end of November 1999, despite
blocking more than 150 IP addresses, it became apparent that eBay was unable to
prevent BE's crawling of the eBay system via rotating proxy servers. Having failed
in its attempt at self-help, eBay filed this suit on December 10, 1999, and filed this
motion five weeks later. The fact that eBay's primary concern is the threat from
the likely increase in crawling activity that would result if BE is allowed to continue
its unauthorized conduct, combined with eBay's repeated attempts to resolve this
dispute without judicial intervention, and BE's continuing attempts to thwart eBay's
protection of its property, convinces the court that eBay's delay in seeking
preliminary relief was justified. BE argues that even if eBay will be irreparably
harmed if a preliminary injunction is not granted, BE will suffer greater irreparable
harm if an injunction is granted. According to BE, lack of access to eBay's
database will result in a two-thirds decrease in the items listed on BE, and a oneeighth reduction in the value of BE, from $80 million to $70 million. Although the
potential harm to BE does not appear insignificant, BE does not appear to have
suffered any irreparable harm during the period it voluntarily ceased crawling the
eBay site. Barring BE from automatically querying eBay's site does not prevent BE
from maintaining an aggregation site including information from eBay's site. Any
potential economic harm is appropriately addressed through the posting of an
adequate bond.
...
B. Likelihood of Success
. . . The court finds that eBay has established a sufficient likelihood of prevailing on
the trespass claim to support the requested injunctive relief. . . .
1. Trespass
Trespass to chattels “lies where an intentional interference with the possession of
personal property has proximately cause injury.” Thrifty-Tel v. Bezenek, 46
Cal.App.4th 1559, 1566, 54 Cal.Rptr.2d 468 (1996). Trespass to chattels
“although seldom employed as a tort theory in California” was recently applied to
cover the unauthorized use of long distance telephone lines. Id. Specifically, the
court noted “the electronic signals generated by the [defendants'] activities were
sufficiently tangible to support a trespass cause of action.” Id. at n. 6. Thus, it
appears likely that the electronic signals sent by BE to retrieve information from
eBay's computer system are also sufficiently tangible to support a trespass cause of
action.
In order to prevail on a claim for trespass based on accessing a computer system,
the plaintiff must establish: (1) defendant intentionally and without authorization
interfered with plaintiff's possessory interest in the computer system; and (2)
defendant's unauthorized use proximately resulted in damage to plaintiff. See
Thrifty-Tel, 46 Cal.App.4th at 1566, 54 Cal.Rptr.2d 468; see also Itano v. Colonial
Yacht Anchorage, 267 Cal.App.2d 84, 90, 72 Cal.Rptr. 823 (1968) (“When conduct
complained of consists of intermeddling with personal property ‘the owner has a
17
cause of action for trespass or case, and may recover only the actual damages
suffered by reason of the impairment of the property or the loss of its use.’ ”)
(quoting Zaslow v. Kroenert, 29 Cal.2d 541, 550, 176 P.2d 1 (1946)). Here, eBay
has presented evidence sufficient to establish a strong likelihood of proving both
prongs and ultimately prevailing on the merits of its trespass claim.
a. BE's Unauthorized Interference
eBay argues that BE's use was unauthorized and intentional. eBay is correct. BE
does not dispute that it employed an automated computer program to connect with
and search eBay's electronic database. BE admits that, because other auction
aggregators were including eBay's auctions in their listing, it continued to “crawl”
eBay's web site even after eBay demanded BE terminate such activity.
BE argues that it cannot trespass eBay's web site because the site is publicly
accessible. BE's argument is unconvincing. eBay's servers are private property,
conditional access to which eBay grants the public. eBay does not generally permit
the type of automated access made by BE. In fact, eBay explicitly notifies
automated visitors that their access is not permitted. “In general, California does
recognize a trespass claim where the defendant exceeds the scope of the consent.”
Baugh v. CBS, Inc., 828 F.Supp. 745, 756 (N.D.Cal.1993).
Even if BE's web crawlers were authorized to make individual queries of eBay's
system, BE's web crawlers exceeded the scope of any such consent when they
began acting like robots by making repeated queries. See City of Amsterdam v.
Daniel Goldreyer, Ltd., 882 F.Supp. 1273, 1281 (E.D.N.Y.1995) (“One who uses a
chattel with the consent of another is subject to liability in trespass for any harm to
the chattel which is caused by or occurs in the course of any use exceeding the
consent, even though such use is not a conversion.”). Moreover, eBay repeatedly
and explicitly notified BE that its use of eBay's computer system was unauthorized.
The entire reason BE directed its queries through proxy servers was to evade
eBay's attempts to stop this unauthorized access. The court concludes that BE's
activity is sufficiently outside of the scope of the use permitted by eBay that it is
unauthorized for the purposes of establishing a trespass. See Civic Western Corp.
v. Zila Industries, Inc., 66 Cal.App.3d 1, 17, 135 Cal.Rptr. 915 (1977) (“It seems
clear, however, that a trespass may occur if the party, entering pursuant to a
limited consent, ... proceeds to exceed those limits ...”) (discussing trespass to real
property).
eBay argues that BE interfered with eBay's possessory interest in its computer
system. Although eBay appears unlikely to be able to show a substantial
interference at this time, such a showing is not required. Conduct that does not
amount to a substantial interference with possession, but which consists of
intermeddling with or use of another's personal property, is sufficient to establish a
cause of action for trespass to chattel. See Thrifty-Tel, 46 Cal.App.4th at 1567, 54
Cal.Rptr.2d 468 (distinguishing the tort from conversion). Although the court
admits some uncertainty as to the precise level of possessory interference required
to constitute an intermeddling, there does not appear to be any dispute that eBay
can show that BE's conduct amounts to use of eBay's computer systems.
Accordingly, eBay has made a strong showing that it is likely to prevail on the
merits of its assertion that BE's use of eBay's computer system was an
unauthorized and intentional interference with eBay's possessory interest.
b. Damage to eBay's Computer System
18
A trespasser is liable when the trespass diminishes the condition, quality or value of
personal property. See CompuServe, Inc. v. Cyber Promotions, 962 F.Supp. 1015
(S.D.Ohio 1997). The quality or value of personal property may be “diminished
even though it is not physically damaged by defendant's conduct.” Id. at 1022.
The Restatement offers the following explanation for the harm requirement:
The interest of a possessor of a chattel in its inviolability, unlike the similar interest
of a possessor of land, is not given legal protection by an action for nominal
damages for harmless intermeddlings with the chattel. In order that an actor who
interferes with another's chattel may be liable, his conduct must affect some other
and more important interest of the possessor. Therefore, one who intentionally
intermeddles with another's chattel is subject to liability only if his intermeddling is
harmful to the possessor's materially valuable interest in the physical condition,
quality, or value of the chattel, or if the possessor is deprived of the use of the
chattel for a substantial time, or some other legally protected interest of the
possessor is affected.... Sufficient legal protection of the possessor's interest in the
mere inviolability of his chattel is afforded by his privilege to use reasonable force
to protect his possession against even harmless interference.
Restatement (Second) of Torts § 218 cmt. e (1977).
eBay is likely to be able to demonstrate that BE's activities have diminished the
quality or value of eBay's computer systems. BE's activities consume at least a
portion of plaintiff's bandwidth and server capacity. . . . Although eBay does not
claim that this consumption has led to any physical damage to eBay's computer
system, nor does eBay provide any evidence to support the claim that it may have
lost revenues or customers based on this use, eBay's claim is that BE's use is
appropriating eBay's personal property by using valuable bandwidth and capacity,
and necessarily compromising eBay's ability to use that capacity for its own
purposes. See CompuServe, 962 F.Supp. at 1022 (“any value [plaintiff] realizes
from its computer equipment is wholly derived from the extent to which that
equipment can serve its subscriber base.”).
BE argues that its searches represent a negligible load on plaintiff's computer
systems, and do not rise to the level of impairment to the condition or value of
eBay's computer system required to constitute a trespass. However, it is
undisputed that eBay's server and its capacity are personal property, and that BE's
searches use a portion of this property. Even if, as BE argues, its searches use
only a small amount of eBay's computer system capacity, BE has nonetheless
deprived eBay of the ability to use that portion of its personal property for its own
purposes. The law recognizes no such right to use another's personal property.
Accordingly, BE's actions appear to have caused injury to eBay and appear likely to
continue to cause injury to eBay. If the court were to hold otherwise, it would likely
encourage other auction aggregators to crawl the eBay site, potentially to the point
of denying effective access to eBay's customers. If preliminary injunctive relief
were denied, and other aggregators began to crawl the eBay site, there appears to
be little doubt that the load on eBay's computer system would qualify as a
substantial impairment of condition or value. California law does not require eBay
to wait for such a disaster before applying to this court for relief. The court
concludes that eBay has made a strong showing that it is likely to prevail on the
merits of its trespass claim, and that there is at least a possibility that it will suffer
irreparable harm if preliminary injunctive relief is not granted. eBay is therefore
19
entitled to preliminary injunctive relief.
...
3. Public Interest
The traditional equitable criteria for determining whether an injunction should issue
include whether the public interest favors granting the injunction. American
Motorcyclist Ass'n v. Watt, 714 F.2d 962, 965 (9th Cir.1983). The parties submit a
variety of declarations asserting that the Internet will cease to function if, according
to eBay, personal and intellectual property rights are not respected, or, according
to BE, if information published on the Internet cannot be universally accessed and
used. Although the court suspects that the Internet will not only survive, but
continue to grow and develop regardless of the outcome of this litigation, the court
also recognizes that it is poorly suited to determine what balance between
encouraging the exchange of information, and preserving economic incentives to
create, will maximize the public good. Particularly on the limited record available
at the preliminary injunction stage, the court is unable to determine whether the
general public interest factors in favor of or against a preliminary injunction.
BE makes the more specific allegation that granting a preliminary injunction in
favor of eBay will harm the public interest because eBay is alleged to have engaged
in anticompetitive behavior in violation of federal antitrust law. The Ninth Circuit
has noted that in evaluating whether to issue a preliminary injunction, the district
court is under no obligation to consider the merits of any antitrust counterclaims
once the plaintiff has demonstrated a likelihood of success on the merits. See
Triad Sys. Corp. v. Southeastern Exp. Co., 64 F.3d 1330, 1336 n. 13 (9th Cir.1995)
(discussing claim of copyright infringement). Although anticompetitive behavior
may be appropriately considered in the context of a preliminary injunction based on
trademark infringement, where misuse is an affirmative defense, see Helene Curtis
Indus. v. Church & Dwight Co., 560 F.2d 1325 (7th Cir.1977), it does not appear to
be appropriately considered here, because there is no equivalent affirmative
defense to trespass to chattels. Accordingly, the court concludes the public
interest does not weigh against granting a preliminary injunction.
IV. ORDER
Bidder's Edge . . . [is] hereby enjoined pending the trial of this matter, from using
any automated query program, robot, web crawler or other similar device, without
written authorization, to access eBay's computer systems or networks, for the
purpose of copying any part of eBay's auction database.
Notes and Questions
1. It is sufficient for trespass to chattels occurs that an intentional unauthorized
use of a chattel impair the chattel’s value. After finding that Bidders’ Edge’s
searches were an intentional unauthorized use of eBay’s computers, the court
addressed the question of whether there was sufficient damage to eBay’s
computers to hold that the searches impaired their value. The court concluded
that, even if Bidders’ Edge use only a small amount of eBay's computer capacity, it
thereby deprived eBay of its ability to use that capacity, and hence that Bidders’
edge did impair the value of the computers.
This creates an very broad right to exclude since any electronic access to a
computer system will use some portion of the systems computing power, this
means, in effect, that any intentional, unauthorized access to a computer will
20
reduce its condition, quality or value. Should we recognize such a broad right?
2. eBay’s grounds for issuing an injunction are different than its grounds for finding
trespass to chattels (this point difference is often overlooked). eBay issues an
injunction on the ground that others might be encouraged to systematically search
eBay if Bidders’ Edge were allowed to. The combined searches might overload
eBay’s computers and hence cause them to slow down or shut down.
Why is the finding of trespass to chattels discussed in (1) not by itself a sufficient
ground to issue an injunction?
Buchanan Marine Inc. v. Mccormack Sand Company
743 F.Supp. 139 (1990)
MEMORANDUM AND ORDER
NICKERSON, District Judge.
Plaintiff Buchanan Marine Inc. (Buchanan), an owner and operator of
tugboats and barges in Connecticut and elsewhere, brought this action to enjoin
defendants from using its commercial barge mooring in Stamford Harbor,
Connecticut, and to recover damages allegedly arising from defendants' use of the
mooring. . . . Defendants now move for summary judgment, arguing that
Buchanan is not entitled to exclusive use of the buoy and that its claims for
injunctive and declaratory relief should be dismissed. Defendants also ask for
sanctions.
I
The facts . . . may be summarized as follows.
Buchanan owns and operates tug boats and barges for the delivery of stone
and other bulk material in, among other places, Connecticut. Defendants operate
barges in Stamford Harbor (the Harbor).
Both Buchanan and defendants have customers in the Harbor and say they
require a harbor mooring to do business in the area. Apparently, placing a
mooring outside the Harbor would cause a hazard to navigation and is thus not
feasible.
Buchanan claims to own the physical buoy and to have obtained a permit in
October 1981 from the Stamford Harbor master John Sheridan to maintain the
buoy at a particular location in the Harbor. While allegedly never authorizing
others to use the buoy, Buchanan admittedly tolerated until 1983 the occasional
such use by defendants. . . .
In July 1982, Buchanan notified other companies towing barges in the Harbor
that it would charge them for unauthorized tie-ups at the mooring. In response to
21
Buchanan's notice, defendant McCormack Sand Company Inc. allegedly asked
Sheridan for its own mooring permit and received a response that only one
commercial anchorage would be permitted in the Harbor. . . .
Buchanan asserts that on November 5, 1985 certain of the defendants
wrongly secured barges to the buoy. Because of their weight, the outermost three
barges broke away and drifted to the Greenwich Town Beach. Buchanan's barge
was damaged, and it incurred costs for cleaning up the beach.
Despite repeated oral and written warnings by Buchanan to remove their
barges, defendants continue to use the mooring buoy.
II
A person commits a trespass to a chattel by "intentionally (a) dispossessing
another of the chattel, or (b) using or intermeddling with a chattel in the possession
of another." See Restatement (Second) of the Law of Torts § 217 (1965).
A person is liable to the possessor, the owner, of the chattel "if, but only if,
(a) he dispossess the other of the chattel, or (b) the chattel is impaired as to its
condition, quality, or value, or (c) the possessor is deprived of the use of the
chattel for a substantial time, or (d) bodily harm is caused to the possessor, or
harm is caused to some person or thing in which the possessor has a legally
protected interest." Id. at § 218.
A person may recover "for all the harm to the chattel and for incidental
damages proximately caused by the intermeddling." See Harper James & Gray,
The Law of Torts (2d ed 1986) § 2.6 at 185.
There is no reason to doubt that Connecticut would follow the Restatement.
Accord State v. Tully, 348 A.2d 603, 612 n. 3 (Conn.Sup.Ct.1974) (Bogdanski,
Associate Justice, dissenting) (protecting another from harm justifies trespass to
chattel).
Buchanan alleges it bought and maintained the eight by eight foot steel drum
that, placed in the Harbor, has become the commercial mooring buoy at issue.
Buchanan says it has not consented either expressly or by implication to
defendants' use of the buoy and has not abandoned the buoy. . . .
[T]he court holds that the mooring buoy, whether sitting on land or floating
in Stamford harbor, is Buchanan's chattel, and that defendants' meddling with it is
either a trespass to a chattel or perhaps a conversion for which Buchanan may seek
relief in the form of damages and an injunction.
Intel Corporation v. Hamidi
Werdegar, J.
30 Cal.4th 1342 (2003)
22
Intel Corporation (Intel) maintains an electronic mail system, connected to
the Internet, through which messages between employees and those outside the
company can be sent and received, and permits its employees to make reasonable
nonbusiness use of this system. On six occasions over almost two years, Kourosh
Kenneth Hamidi, a former Intel employee, sent e-mails criticizing Intel's
employment practices to numerous current employees on Intel's electronic mail
system. Hamidi breached no computer security barriers in order to communicate
with Intel employees. He offered to, and did, remove from his mailing list any
recipient who so wished. Hamidi's communications to individual Intel employees
caused neither physical damage nor functional disruption to the company's
computers, nor did they at any time deprive Intel of the use of its computers. The
contents of the messages, however, caused discussion among employees and
managers.
On these facts, Intel brought suit, claiming that by communicating with its
employees over the company's e-mail system Hamidi committed the tort of
trespass to chattels. The trial court granted Intel's motion for summary judgment
and enjoined Hamidi from any further mailings. A divided Court of Appeal affirmed.
After reviewing the decisions analyzing unauthorized electronic contact with
computer systems as potential trespasses to chattels, we conclude that under
California law the tort does not encompass, and should not be extended to
encompass, an electronic communication that neither damages the recipient
computer system nor impairs its functioning. Such an electronic communication
does not constitute an actionable trespass to personal property, i.e., the computer
system, because it does not interfere with the possessor's use or possession of, or
any other legally protected interest in, the personal property itself. (See Zaslow v.
Kroenert (1946) 29 Cal.2d 541, 551, 176 P.2d 1; Ticketmaster Corp. v.
Tickets.com, Inc. (C.D.Cal., Aug. 10, 2000, No. 99CV7654) 2000 WL 1887522, p.
*4; Rest.2d Torts, § 218.) The consequential economic damage Intel claims to
have suffered, i.e., loss of productivity caused by employees reading and reacting
to Hamidi's messages and company efforts to block the messages, is not an injury
to the company's interest in its computers--which worked as intended and were
unharmed by the communications--any more than the personal distress caused by
reading an unpleasant letter would be an injury to the recipient's mailbox, or the
loss of privacy caused by an intrusive telephone call would be an injury to the
recipient's telephone equipment.
Our conclusion does not rest on any special immunity for communications by
electronic mail; we do not hold that messages transmitted through the Internet are
exempt from the ordinary rules of tort liability. To the contrary, e-mail, like other
forms of communication, may in some circumstances cause legally cognizable
injury to the recipient or to third parties and may be actionable under various
common law or statutory theories. Indeed, on facts somewhat similar to those
here, a company or its employees might be able to plead causes of action for
interference with prospective economic relations (see Guillory v. Godfrey (1955)
134 Cal.App.2d 628, 630- 632, 286 P.2d 474 [defendant berated customers and
23
prospective customers of plaintiffs' cafe with disparaging and racist comments] ),
interference with contract (see Blender v. Superior Court (1942) 55 Cal.App.2d 24,
25-27, 130 P.2d 179 [defendant made false statements about plaintiff to his
employer, resulting in plaintiff's discharge] ) or intentional infliction of emotional
distress (see Kiseskey v. Carpenters' Trust for So. California (1983) 144 Cal.App.3d
222, 229-230, 192 Cal.Rptr. 492 [agents of defendant union threatened life, health,
and family of employer if he did not sign agreement with union].) And, of course,
as with any other means of publication, third party subjects of e-mail
communications may under appropriate facts make claims for defamation,
publication of private facts, or other speech-based torts. (See, e.g., Southridge
Capital Management v. Lowry (S.D.N.Y.2002) 188 F.Supp.2d 388, 394-396
[allegedly false statements in e-mail sent to several of plaintiff's clients support
actions for defamation and interference with contract].) Intel's claim fails not
because e-mail transmitted through the Internet enjoys unique immunity, but
because the trespass to chattels tort--unlike the causes of action just mentioned-may not, in California, be proved without evidence of an injury to the plaintiff's
personal property or legal interest therein.
Nor does our holding affect the legal remedies of Internet service providers
(ISP's) against senders of unsolicited commercial bulk e-mail (UCE), also known as
"spam." (See Ferguson v. Friendfinders, Inc. (2002) 94 Cal.App.4th 1255, 1267,
115 Cal.Rptr.2d 258.) A series of federal district court decisions, beginning with
CompuServe, Inc. v. Cyber Promotions, Inc. (S.D.Ohio 1997) 962 F.Supp. 1015,
has approved the use of trespass to chattels as a theory of spammers' liability to
ISP's, based upon evidence that the vast quantities of mail sent by spammers both
overburdened the ISP's own computers and made the entire computer system
harder to use for recipients, the ISP's customers. (See id. at pp. 1022-1023.) In
those cases, discussed in greater detail below, the underlying complaint was that
the extraordinary quantity of UCE impaired the computer system's functioning. In
the present case, the claimed injury is located in the disruption or distraction
caused to recipients by the contents of the e-mail messages, an injury entirely
separate from, and not directly affecting, the possession or value of personal
property.
FACTUAL AND PROCEDURAL BACKGROUND
We review a grant of summary judgment de novo; we must decide
independently whether the facts not subject to triable dispute warrant judgment for
the moving party as a matter of law. . . . The pertinent undisputed facts are as
follows.
Hamidi, a former Intel engineer, together with others, formed an
organization named Former and Current Employees of Intel (FACE-Intel) to
disseminate information and views critical of Intel's employment and personnel
policies and practices. FACE-Intel maintained a Web site (which identified Hamidi
as Webmaster and as the organization's spokesperson) containing such material.
In addition, over a 21-month period Hamidi, on behalf of FACE-Intel, sent six mass
e-mails to employee addresses on Intel's electronic mail system. The messages
24
criticized Intel's employment practices, warned employees of the dangers those
practices posed to their careers, suggested employees consider moving to other
companies, solicited employees' participation in FACE-Intel, and urged employees
to inform themselves further by visiting FACE-Intel's Web site. The messages
stated that recipients could, by notifying the sender of their wishes, be removed
from FACE-Intel's mailing list; Hamidi did not subsequently send messages to
anyone who requested removal.
Each message was sent to thousands of addresses (as many as 35,000
according to FACE-Intel's Web site), though some messages were blocked by Intel
before reaching employees. Intel's attempt to block internal transmission of the
messages succeeded only in part; Hamidi later admitted he evaded blocking efforts
by using different sending computers. When Intel, in March 1998, demanded in
writing that Hamidi and FACE-Intel stop sending e-mails to Intel's computer
system, Hamidi asserted the organization had a right to communicate with willing
Intel employees; he sent a new mass mailing in September 1998.
The summary judgment record contains no evidence Hamidi breached Intel's
computer security in order to obtain the recipient addresses for his messages;
indeed, internal Intel memoranda show the company's management concluded no
security breach had occurred.2 Hamidi stated he created the recipient address list
using an Intel directory on a floppy disk anonymously sent to him. Nor is there any
evidence that the receipt or internal distribution of Hamidi's electronic messages
damaged Intel's computer system or slowed or impaired its functioning. Intel did
present uncontradicted evidence, however, that many employee recipients asked a
company official to stop the messages and that staff time was consumed in
attempts to block further messages from FACE- Intel. According to the FACE-Intel
Web site, moreover, the messages had prompted discussions between "[e]xcited
and nervous managers" and the company's human resources department.
Intel sued Hamidi and FACE-Intel, pleading causes of action for trespass to
chattels and nuisance, and seeking both actual damages and an injunction against
further e-mail messages. Intel later voluntarily dismissed its nuisance claim and
waived its demand for damages. The trial court entered default against FACE-Intel
upon that organization's failure to answer. The court then granted Intel's motion
for summary judgment, permanently enjoining Hamidi, FACE-Intel, and their agents
"from sending unsolicited e-mail to addresses on Intel's computer systems."
Hamidi appealed; FACE-Intel did not.
To the extent, therefore, that Justice Mosk suggests Hamidi breached the
security of Intel's internal computer network by "circumvent [ing]" Intel's
"security measures" and entering the company's "intranet" (dis. opn. of Mosk,
J., post, 1 Cal.Rptr.3d at p. 67, 71 P.3d at p. 326), the evidence does not
support such an implication. An "intranet" is "a network based on TCP/IP
protocols (an internet) belonging to an organization, usually a corporation,
accessible only by the organization's members, employees, or others with
authorization." (<http:// www.webopedia.com/TERM/i/intranet.html [as of June
30, 2003].) Hamidi used only a part of Intel's computer network accessible
to outsiders.
2
25
The Court of Appeal, with one justice dissenting, affirmed the grant of
injunctive relief. The majority took the view that the use of or intermeddling with
another's personal property is actionable as a trespass to chattels without proof of
any actual injury to the personal property; even if Intel could not show any
damages resulting from Hamidi's sending of messages, "it showed he was
disrupting its business by using its property and therefore is entitled to injunctive
relief based on a theory of trespass to chattels." The dissenting justice warned that
the majority's application of the trespass to chattels tort to "unsolicited electronic
mail that causes no harm to the private computer system that receives it" would
"expand the tort of trespass to chattel in untold ways and to unanticipated
circumstances."
We granted Hamidi's petition for review.
DISCUSSION
I. Current California Tort Law
Dubbed by Prosser the "little brother of conversion," the tort of trespass to
chattels allows recovery for interferences with possession of personal property "not
sufficiently important to be classed as conversion, and so to compel the defendant
to pay the full value of the thing with which he has interfered." (Prosser & Keeton,
Torts (5th ed.1984) § 14, pp. 85-86.)
Though not amounting to conversion, the defendant's interference must, to
be actionable, have caused some injury to the chattel or to the plaintiff's rights in
it. Under California law, trespass to chattels "lies where an intentional interference
with the possession of personal property has proximately caused injury." (ThriftyTel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559, 1566, 54 Cal.Rptr.2d 468, italics
added.) In cases of interference with possession of personal property not
amounting to conversion, "the owner has a cause of action for trespass or case, and
may recover only the actual damages suffered by reason of the impairment of the
property or the loss of its use." (Zaslow v. Kroenert, supra, 29 Cal.2d at p. 551,
176 P.2d 1, italics added; accord, Jordan v. Talbot (1961) 55 Cal.2d 597, 610, 12
Cal.Rptr. 488, 361 P.2d 20.) In modern American law generally, "[t]respass
remains as an occasional remedy for minor interferences, resulting in some
damage, but not sufficiently serious or sufficiently important to amount to the
greater tort" of conversion. (Prosser & Keeton, Torts, supra, § 15, p. 90, italics
added.)
The Restatement, too, makes clear that some actual injury must have
occurred in order for a trespass to chattels to be actionable. Under section 218 of
the Restatement Second of Torts, dispossession alone, without further damages, is
actionable (see id., par. (a) & com. d, pp. 420- 421), but other forms of
interference require some additional harm to the personal property or the
possessor's interests in it. (Id., pars. (b)-(d).) "The interest of a possessor of a
chattel in its inviolability, unlike the similar interest of a possessor of land, is not
26
given legal protection by an action for nominal damages for harmless
intermeddlings with the chattel. In order that an actor who interferes with
another's chattel may be liable, his conduct must affect some other and more
important interest of the possessor. Therefore, one who intentionally intermeddles
with another's chattel is subject to liability only if his intermeddling is harmful to
the possessor's materially valuable interest in the physical condition, quality, or
value of the chattel, or if the possessor is deprived of the use of the chattel for a
substantial time, or some other legally protected interest of the possessor is
affected as stated in Clause (c). Sufficient legal protection of the possessor's
interest in the mere inviolability of his chattel is afforded by his privilege to use
reasonable force to protect his possession against even harmless interference."
(Id., com. e, pp. 421-422, italics added.)
The Court of Appeal (quoting 7 Speiser et al., American Law of Torts (1990)
Trespass, § 23:23, p. 667) referred to " 'a number of very early cases [showing
that] any unlawful interference, however slight, with the enjoyment by another of
his personal property, is a trespass.' " But while a harmless use or touching of
personal property may be a technical trespass (see Rest.2d Torts, § 217), an
interference (not amounting to dispossession) is not actionable, under modern
California and broader American law, without a showing of harm. As already
discussed, this is the rule embodied in the Restatement (Rest.2d Torts, § 218) and
adopted by California law (Zaslow v. Kroenert, supra, 29 Cal.2d at p. 551, 176 P.2d
1; Thrifty-Tel, Inc. v. Bezenek, supra, 46 Cal.App.4th at p. 1566, 54 Cal.Rptr.2d
468).
In this respect, as Prosser explains, modern day trespass to chattels differs
both from the original English writ and from the action for trespass to land:
"Another departure from the original rule of the old writ of trespass concerns the
necessity of some actual damage to the chattel before the action can be
maintained. Where the defendant merely interferes without doing any harm--as
where, for example, he merely lays hands upon the plaintiff's horse, or sits in his
car--there has been a division of opinion among the writers, and a surprising dearth
of authority. By analogy to trespass to land there might be a technical tort in such
a case .... Such scanty authority as there is, however, has considered that the
dignitary interest in the inviolability of chattels, unlike that as to land, is not
sufficiently important to require any greater defense than the privilege of using
reasonable force when necessary to protect them. Accordingly it has been held
that nominal damages will not be awarded, and that in the absence of any actual
damage the action will not lie." (Prosser & Keeton, Torts, supra, § 14, p. 87, italics
added, fns. omitted.)
Intel suggests that the requirement of actual harm does not apply here
because it sought only injunctive relief, as protection from future injuries. But as
Justice Kolkey, dissenting below, observed, "[t]he fact the relief sought is injunctive
does not excuse a showing of injury, whether actual or threatened." Indeed, in
order to obtain injunctive relief the plaintiff must ordinarily show that the
defendant's wrongful acts threaten to cause irreparable injuries, ones that cannot
be adequately compensated in damages. (5 Witkin, Cal. Procedure (4th ed. 1997)
27
Pleading, § 782, p. 239.) Even in an action for trespass to real property, in which
damage to the property is not an element of the cause of action, "the extraordinary
remedy of injunction" cannot be invoked without showing the likelihood of
irreparable harm. (Mechanics' Foundry v. Ryall (1888) 75 Cal. 601, 603, 17 P. 703;
see Mendelson v. McCabe (1904) 144 Cal. 230, 232-233, 77 P. 915 [injunction
against trespass to land proper where continued trespasses threaten creation of
prescriptive right and repetitive suits for damages would be inadequate remedy].)
A fortiori, to issue an injunction without a showing of likely irreparable injury in an
action for trespass to chattels, in which injury to the personal property or the
possessor's interest in it is an element of the action, would make little legal sense.
The dispositive issue in this case, therefore, is whether the undisputed facts
demonstrate Hamidi's actions caused or threatened to cause damage to Intel's
computer system, or injury to its rights in that personal property, such as to entitle
Intel to judgment as a matter of law. To review, the undisputed evidence revealed
no actual or threatened damage to Intel's computer hardware or software and no
interference with its ordinary and intended operation. Intel was not dispossessed of
its computers, nor did Hamidi's messages prevent Intel from using its computers
for any measurable length of time. Intel presented no evidence its system was
slowed or otherwise impaired by the burden of delivering Hamidi's electronic
messages. Nor was there any evidence transmission of the messages imposed any
marginal cost on the operation of Intel's computers. In sum, no evidence
suggested that in sending messages through Intel's Internet connections and
internal computer system Hamidi used the system in any manner in which it was
not intended to function or impaired the system in any way. Nor does the evidence
show the request of any employee to be removed from FACE-Intel's mailing list was
not honored. The evidence did show, however, that some employees who found
the messages unwelcome asked management to stop them and that Intel technical
staff spent time and effort attempting to block the messages. A statement on the
FACE-Intel Web site, moreover, could be taken as an admission that the messages
had caused "[e]xcited and nervous managers" to discuss the matter with Intel's
human resources department.
Relying on a line of decisions, most from federal district courts, applying the
tort of trespass to chattels to various types of unwanted electronic contact between
computers, Intel contends that, while its computers were not damaged by receiving
Hamidi's messages, its interest in the "physical condition, quality or value" (Rest.2d
Torts, § 218, com. e, p. 422) of the computers was harmed. We disagree. The
cited line of decisions does not persuade us that the mere sending of electronic
communications that assertedly cause injury only because of their contents
constitutes an actionable trespass to a computer system through which the
messages are transmitted. Rather, the decisions finding electronic contact to be a
trespass to computer systems have generally involved some actual or threatened
interference with the computers' functioning.
In Thrifty-Tel, Inc. v. Bezenek, supra, 46 Cal.App.4th at pages 1566-1567,
54 Cal.Rptr.2d 468 (Thrifty-Tel ), the California Court of Appeal held that evidence
of automated searching of a telephone carrier's system for authorization codes
28
supported a cause of action for trespass to chattels. The defendant's automated
dialing program "overburdened the [plaintiff's] system, denying some subscribers
access to phone lines" (Thrifty-Tel, supra, 46 Cal.App. 4th at p. 1564, 54
Cal.Rptr.2d 468), showing the requisite injury.
Following Thrifty-Tel, a series of federal district court decisions held that
sending UCE through an ISP's equipment may constitute trespass to the ISP's
computer system. The lead case, CompuServe, Inc. v. Cyber Promotions, Inc.,
supra, 962 F.Supp. 1015, 1021-1023 (CompuServe ), was followed by Hotmail
Corp. v. Van$ Money Pie, Inc. (N.D.Cal., Apr. 16, 1998, No. C 98-20064 JW) 1998
WL 388389, page *7, America Online, Inc. v. IMS (E.D.Va.1998) 24 F.Supp.2d 548,
550-551, and America Online, Inc. v. LCGM, Inc. (E.D.Va.1998) 46 F.Supp.2d 444,
451-452.
In each of these spamming cases, the plaintiff showed, or was prepared to
show, some interference with the efficient functioning of its computer system. In
CompuServe, the plaintiff ISP's mail equipment monitor stated that mass UCE
mailings, especially from nonexistent addresses such as those used by the
defendant, placed "a tremendous burden" on the ISP's equipment, using "disk
space and drain[ing] the processing power," making those resources unavailable to
serve subscribers. (CompuServe, supra, 962 F.Supp. at p. 1022.) Similarly, in
Hotmail Corp. v. Van$ Money Pie, Inc., supra, 1998 WL 388389 at page *7, the
court found the evidence supported a finding that the defendant's mailings "fill[ed]
up Hotmail's computer storage space and threaten [ed] to damage Hotmail's ability
to service its legitimate customers." America Online, Inc. v. IMS, decided on
summary judgment, was deemed factually indistinguishable from CompuServe; the
court observed that in both cases the plaintiffs "alleged that processing the bulk email cost them time and money and burdened their equipment." (America Online,
Inc. v. IMS, supra, 24 F.Supp.2d at p. 550.) The same court, in America Online,
Inc. v. LCGM, Inc., supra, 46 F.Supp.2d at page 452, simply followed CompuServe
and its earlier America Online decision, quoting the former's explanation that UCE
burdened the computer's processing power and memory.
Building on the spamming cases, in particular CompuServe, three even more
recent district court decisions addressed whether unauthorized robotic data
collection [FN4] from a company's publicly accessible Web site is a trespass on the
company's computer system. (eBay, Inc. v. Bidder's Edge, Inc., supra, 100
F.Supp.2d at pp. 1069-1072 (eBay ); Register.com, Inc. v. Verio, Inc.
(S.D.N.Y.2000) 126 F.Supp.2d 238, 248-251; Ticketmaster Corp. v. Tickets.com,
Inc., supra, 2000 WL 1887522, at p. *4.) The two district courts that found such
automated data collection to constitute a trespass relied, in part, on the deleterious
impact this activity could have, especially if replicated by other searchers, on the
functioning of a Web site's computer equipment.
FN4. Data search and collection robots, also known as "Web bots" or
"spiders," are programs designed to rapidly search numerous Web pages or
sites, collecting, retrieving, and indexing information from these pages. Their
29
uses include creation of searchable databases, Web catalogues and
comparison shopping services. (eBay, Inc. v. Bidder's Edge, Inc.
(N.D.Cal.2000) 100 F.Supp.2d 1058, 1060-1061; O'Rourke, Property Rights
and Competition on the Internet: In Search of an Appropriate Analogy
(2001) 16 Berkeley Tech. L.J. 561, 570-571; Quilter, The Continuing
Expansion of Cyberspace Trespass to Chattels (2002) 17 Berkeley Tech. L.J.
421, 423-424.)
In the leading case, eBay, the defendant Bidder's Edge (BE), operating an
auction aggregation site, accessed the eBay Web site about 100,000 times per day,
accounting for between 1 and 2 percent of the information requests received by
eBay and a slightly smaller percentage of the data transferred by eBay. (eBay,
supra, 100 F.Supp.2d at pp. 1061, 1063.) The district court rejected eBay's claim
that it was entitled to injunctive relief because of the defendant's unauthorized
presence alone, or because of the incremental cost the defendant had imposed on
operation of the eBay site (id. at pp. 1065-1066), but found sufficient proof of
threatened harm in the potential for others to imitate the defendant's activity: "If
BE's activity is allowed to continue unchecked, it would encourage other auction
aggregators to engage in similar recursive searching of the eBay system such that
eBay would suffer irreparable harm from reduced system performance, system
unavailability, or data losses." (Id. at p. 1066.) Again, in addressing the likelihood
of eBay's success on its trespass to chattels cause of action, the court held the
evidence of injury to eBay's computer system sufficient to support a preliminary
injunction: "If the court were to hold otherwise, it would likely encourage other
auction aggregators to crawl the eBay site, potentially to the point of denying
effective access to eBay's customers. If preliminary injunctive relief were denied,
and other aggregators began to crawl the eBay site, there appears to be little doubt
that the load on eBay's computer system would qualify as a substantial impairment
of condition or value." (Id. at pp. 1071-1072.)
Another district court followed eBay on similar facts--a domain name
registrar's claim against a Web hosting and development site that robotically
searched the registrar's database of newly registered domain names in search of
business leads--in Register.com, Inc. v. Verio, Inc., supra, 126 F.Supp.2d at pages
249-251. Although the plaintiff was unable to measure the burden the defendant's
searching had placed on its system (id. at pp. 249-250), the district court, quoting
the declaration of one of the plaintiff's officers, found sufficient evidence of
threatened harm to the system in the possibility the defendant's activities would be
copied by others: " 'I believe that if Verio's searching of Register.com's WHOIS
database were determined to be lawful, then every purveyor of Internet-based
services would engage in similar conduct.' " (Id. at p. 250.) Like eBay, the court
observed, Register.com had a legitimate fear "that its servers will be flooded by
search robots." (Id. at p. 251.)
In the third decision discussing robotic data collection as a trespass,
Ticketmaster Corp. v. Tickets.com, Inc., supra, 2000 WL 1887522 (Ticketmaster ),
the court, distinguishing eBay, found insufficient evidence of harm to the chattel to
30
constitute an actionable trespass: "A basic element of trespass to chattels must be
physical harm to the chattel (not present here) or some obstruction of its basic
function (in the court's opinion not sufficiently shown here).... The comparative use
[by the defendant of the plaintiff's computer system] appears very small and there
is no showing that the use interferes to any extent with the regular business of [the
plaintiff].... Nor here is the specter of dozens or more parasites joining the fray, the
cumulative total of which could affect the operation of [the plaintiff's ] business."
(id. at p. *4, italics added.)
In the decisions so far reviewed, the defendant's use of the plaintiff's
computer system was held sufficient to support an action for trespass when it
actually did, or threatened to, interfere with the intended functioning of the system,
as by significantly reducing its available memory and processing power. In
Ticketmaster, supra, 2000 WL 1887522, the one case where no such effect, actual
or threatened, had been demonstrated, the court found insufficient evidence of
harm to support a trespass action. These decisions do not persuade us to Intel's
position here, for Intel has demonstrated neither any appreciable effect on the
operation of its computer system from Hamidi's messages, nor any likelihood that
Hamidi's actions will be replicated by others if found not to constitute a trespass.
That Intel does not claim the type of functional impact that spammers and
robots have been alleged to cause is not surprising in light of the differences
between Hamidi's activities and those of a commercial enterprise that uses sheer
quantity of messages as its communications strategy. Though Hamidi sent
thousands of copies of the same message on six occasions over 21 months, that
number is minuscule compared to the amounts of mail sent by commercial
operations. The individual advertisers sued in America Online, Inc. v. IMS, supra,
24 F.Supp.2d at page 549, and America Online, Inc. v. LCGM, Inc., supra, 46
F.Supp.2d at page 448, were alleged to have sent more than 60 million messages
over 10 months and more than 92 million messages over seven months,
respectively. Collectively, UCE has reportedly come to constitute about 45 percent
of all e-mail. (Hansell, Internet Is Losing Ground in Battle Against Spam, N.Y.
Times (Apr. 22, 2003) p. A1, col. 3.) The functional burden on Intel's computers, or
the cost in time to individual recipients, of receiving Hamidi's occasional advocacy
messages cannot be compared to the burdens and costs caused ISP's and their
customers by the ever-rising deluge of commercial e-mail.
Intel relies on language in the eBay decision suggesting that unauthorized
use of another's chattel is actionable even without any showing of injury: "Even if,
as [defendant] BE argues, its searches use only a small amount of eBay's computer
system capacity, BE has nonetheless deprived eBay of the ability to use that portion
of its personal property for its own purposes. The law recognizes no such right to
use another's personal property." (eBay, supra, 100 F.Supp.2d at p. 1071.) But as
the eBay court went on immediately to find that the defendant's conduct, if widely
replicated, would likely impair the functioning of the plaintiff's system (id. at pp.
1071-1072), we do not read the quoted remarks as expressing the court's complete
view of the issue. In isolation, moreover, they would not be a correct statement of
California or general American law on this point. While one may have no right
31
temporarily to use another's personal property, such use is actionable as a trespass
only if it "has proximately caused injury." (Thrifty-Tel, supra, 46 Cal.App.4th at p.
1566, 54 Cal.Rptr.2d 468.) "[I]n the absence of any actual damage the action will
not lie." (Prosser & Keeton, Torts, supra, § 14, p. 87.) Short of dispossession,
personal injury, or physical damage (not present here), intermeddling is actionable
only if "the chattel is impaired as to its condition, quality, or value, or [¶ ] ... the
possessor is deprived of the use of the chattel for a substantial time." (Rest.2d
Torts, § 218, pars. (b), (c).) In particular, an actionable deprivation of use "must
be for a time so substantial that it is possible to estimate the loss caused thereby.
A mere momentary or theoretical deprivation of use is not sufficient unless there is
a dispossession...." (Id., com. i, p. 423.) That Hamidi's messages temporarily used
some portion of the Intel computers' processors or storage is, therefore, not
enough; Intel must, but does not, demonstrate some measurable loss from the use
of its computer system. [FN5]
FN5. In the most recent decision relied upon by Intel, Oyster Software, Inc.
v. Forms Processing, Inc. (N.D.Cal., Dec. 6, 2001, No. C-00- 0724 JCS) 2001
WL 1736382, pages *12-*13, a federal magistrate judge incorrectly read
eBay as establishing, under California law, that mere unauthorized use of
another's computer system constitutes an actionable trespass. The plaintiff
accused the defendant, a business competitor, of copying the metatags (code
describing the contents of a Web site to a search engine) from the plaintiff's
Web site, resulting in diversion of potential customers for the plaintiff's
services. (Id. at pp. *1-*2.) With regard to the plaintiff's trespass claim
(the plaintiff also pleaded causes of action for, inter alia, misappropriation,
copyright and trademark infringement), the magistrate judge concluded that
eBay imposed no requirement of actual damage and that the defendant's
conduct was sufficient to establish a trespass "simply because [it] amounted
to 'use' of Plaintiff's computer." (Id. at p. *13.) But as just explained, we do
not read eBay, supra, 100 F.Supp.2d 1058, as holding that the actual injury
requirement may be dispensed with, and such a suggestion would, in any
event, be erroneous as a statement of California law.
In addition to impairment of system functionality, CompuServe and its progeny
also refer to the ISP's loss of business reputation and customer goodwill, resulting
from the inconvenience and cost that spam causes to its members, as harm to the
ISP's legally protected interests in its personal property. (See CompuServe, supra,
962 F.Supp. at p. 1023; Hotmail Corp. v. Van$ Money Pie, Inc., supra, 1998 WL
388389 at p. *7; America Online, Inc. v. IMS, supra, 24 F.Supp.2d at p. 550.)
Intel argues that its own interest in employee productivity, assertedly disrupted by
Hamidi's messages, is a comparable protected interest in its computer system. We
disagree.
Whether the economic injuries identified in CompuServe were properly
considered injuries to the ISP's possessory interest in its personal property, the
type of property interest the tort is primarily intended to protect (see Rest.2d Torts,
32
§ 218 & com. e, pp. 421-422; Prosser & Keeton, Torts, supra, § 14, p. 87), has
been questioned. [FN6] "[T]he court broke the chain between the trespass and the
harm, allowing indirect harms to CompuServe's business interests--reputation,
customer goodwill, and employee time--to count as harms to the chattel (the
server)." (Quilter, The Continuing Expansion of Cyberspace Trespass to Chattels,
supra, 17 Berkeley Tech. L.J. at pp. 429-430.) "[T]his move cuts trespass to
chattels free from its moorings of dispossession or the equivalent, allowing the
court free reign [sic] to hunt for 'impairment.' " (Burk, The Trouble with Trespass
(2000) 4 J. Small & Emerging Bus.L. 27, 35.) But even if the loss of goodwill
identified in CompuServe were the type of injury that would give rise to a trespass
to chattels claim under California law, Intel's position would not follow, for Intel's
claimed injury has even less connection to its personal property than did
CompuServe's.
FN6. In support of its reasoning, the CompuServe court cited paragraph (d)
of section 218 of the Restatement Second of Torts, which refers to harm "to
some person or thing in which the possessor has a legally protected
interest." As the comment to this paragraph explains, however, it is
intended to cover personal injury to the possessor or another person in
whom the possessor has a legal interest, or injury to "other chattel or land"
in which the possessor of the chattel subject to the trespass has a legal
interest. (Rest.2d Torts, § 218, com. j, p. 423.) No personal injury was
claimed either in CompuServe or in the case at bar, and neither the lost
goodwill in CompuServe nor the loss of employee efficiency claimed in the
present case is chattel or land.
CompuServe's customers were annoyed because the system was inundated with
unsolicited commercial messages, making its use for personal communication more
difficult and costly. (CompuServe, supra, 962 F.Supp. at p. 1023.) Their
complaint, which allegedly led some to cancel their CompuServe service, was about
the functioning of CompuServe's electronic mail service. Intel's workers, in
contrast, were allegedly distracted from their work not because of the frequency or
quantity of Hamidi's messages, but because of assertions and opinions the
messages conveyed. Intel's complaint is thus about the contents of the messages
rather than the functioning of the company's e-mail system. Even accepting
CompuServe's economic injury rationale, therefore, Intel's position represents a
further extension of the trespass to chattels tort, fictionally recharacterizing the
allegedly injurious effect of a communication's contents on recipients as an
impairment to the device which transmitted the message.
This theory of "impairment by content" (Burk, The Trouble with Trespass,
supra, 4 J. Small & Emerging Bus.L. at p. 37) threatens to stretch trespass law to
cover injuries far afield from the harms to possession the tort evolved to protect.
Intel's theory would expand the tort of trespass to chattels to cover virtually any
unconsented--to communication that, solely because of its content, is unwelcome to
the recipient or intermediate transmitter. As the dissenting justice below explained,
33
" 'Damage' of this nature--the distraction of reading or listening to an unsolicited
communication--is not within the scope of the injury against which the trespass-tochattel tort protects, and indeed trivializes it. After all, ' [t]he property interest
protected by the old action of trespass was that of possession; and this has
continued to affect the character of the action.' (Prosser & Keeton on Torts, supra,
§ 14, p. 87.) Reading an e-mail transmitted to equipment designed to receive it,
in and of itself, does not affect the possessory interest in the equipment. [¶ ]
Indeed, if a chattel's receipt of an electronic communication constitutes a trespass
to that chattel, then not only are unsolicited telephone calls and faxes trespasses to
chattel, but unwelcome radio waves and television signals also constitute a trespass
to chattel every time the viewer inadvertently sees or hears the unwanted
program." We agree. While unwelcome communications, electronic or otherwise,
can cause a variety of injuries to economic relations, reputation and emotions,
those interests are protected by other branches of tort law; in order to address
them, we need not create a fiction of injury to the communication system.
Nor may Intel appropriately assert a property interest in its employees' time.
"The Restatement test clearly speaks in the first instance to the impairment of the
chattel.... But employees are not chattels (at least not in the legal sense of the
term)." (Burk, The Trouble with Trespass, supra, 4 J. Small & Emerging Bus.L. at
p. 36.) Whatever interest Intel may have in preventing its employees from
receiving disruptive communications, it is not an interest in personal property, and
trespass to chattels is therefore not an action that will lie to protect it. Nor, finally,
can the fact Intel staff spent time attempting to block Hamidi's messages be
bootstrapped into an injury to Intel's possessory interest in its computers. To
quote, again, from the dissenting opinion in the Court of Appeal: "[I]t is circular to
premise the damage element of a tort solely upon the steps taken to prevent the
damage. Injury can only be established by the completed tort's consequences, not
by the cost of the steps taken to avoid the injury and prevent the tort; otherwise,
we can create injury for every supposed tort."
Intel connected its e-mail system to the Internet and permitted its
employees to make use of this connection both for business and, to a reasonable
extent, for their own purposes. In doing so, the company necessarily contemplated
the employees' receipt of unsolicited as well as solicited communications from other
companies and individuals. That some communications would, because of their
contents, be unwelcome to Intel management was virtually inevitable. Hamidi did
nothing but use the e-mail system for its intended purpose--to communicate with
employees. The system worked as designed, delivering the messages without any
physical or functional harm or disruption. These occasional transmissions cannot
reasonably be viewed as impairing the quality or value of Intel's computer system.
We conclude, therefore, that Intel has not presented undisputed facts
demonstrating an injury to its personal property, or to its legal interest in that
property, that support, under California tort law, an action for trespass to chattels.
II. Proposed Extension of California Tort Law
We next consider whether California common law should be extended to
34
cover, as a trespass to chattels, an otherwise harmless electronic communication
whose contents are objectionable. We decline to so expand California law. Intel, of
course, was not the recipient of Hamidi's messages, but rather the owner and
possessor of computer servers used to relay the messages, and it bases this tort
action on that ownership and possession. The property rule proposed is a rigid one,
under which the sender of an electronic message would be strictly liable to the
owner of equipment through which the communication passes--here, Intel--for any
consequential injury flowing from the contents of the communication. The
arguments of amici curiae and academic writers on this topic, discussed below,
leave us highly doubtful whether creation of such a rigid property rule would be
wise.
Writing on behalf of several industry groups appearing as amici curiae,
Professor Richard A. Epstein of the University of Chicago urges us to excuse the
required showing of injury to personal property in cases of unauthorized electronic
contact between computers, "extending the rules of trespass to real property to all
interactive Web sites and servers." The court is thus urged to recognize, for
owners of a particular species of personal property, computer servers, the same
interest in inviolability as is generally accorded a possessor of land. In effect,
Professor Epstein suggests that a company's server should be its castle, upon which
any unauthorized intrusion, however harmless, is a trespass.
Epstein's argument derives, in part, from the familiar metaphor of the
Internet as a physical space, reflected in much of the language that has been used
to describe it: "cyberspace," "the information superhighway," e-mail "addresses,"
and the like. Of course, the Internet is also frequently called simply the "Net," a
term, Hamidi points out, "evoking a fisherman's chattel." A major component of the
Internet is the World Wide "Web," a descriptive term suggesting neither personal
nor real property, and " cyberspace" itself has come to be known by the
oxymoronic phrase "virtual reality," which would suggest that any real property
"located" in "cyberspace" must be "virtually real" property. Metaphor is a twoedged sword.
Indeed, the metaphorical application of real property rules would not, by
itself, transform a physically harmless electronic intrusion on a computer server into
a trespass. That is because, under California law, intangible intrusions on land,
including electromagnetic transmissions, are not actionable as trespasses (though
they may be as nuisances) unless they cause physical damage to the real property.
(San Diego Gas & Electric Co. v. Superior Court (1996) 13 Cal.4th 893, 936-937,
55 Cal.Rptr.2d 724, 920 P.2d 669.) Since Intel does not claim Hamidi's
electronically transmitted messages physically damaged its servers, it could not
prove a trespass to land even were we to treat the computers as a type of real
property. Some further extension of the conceit would be required, under which
the electronic signals Hamidi sent would be recast as tangible intruders, perhaps as
tiny messengers rushing through the "hallways" of Intel's computers and bursting
out of employees' computers to read them Hamidi's missives. But such fictions
promise more confusion than clarity in the law. (See eBay, supra, 100 F.Supp.2d
at pp. 1065-1066 [rejecting eBay's argument that the defendant's automated data
35
searches "should be thought of as equivalent to sending in an army of 100,000
robots a day to check the prices in a competitor's store"].)
The plain fact is that computers, even those making up the Internet, are-like such older communications equipment as telephones and fax machines-personal property, not realty. Professor Epstein observes that "[a]lthough servers
may be moved in real space, they cannot be moved in cyberspace," because an
Internet server must, to be useful, be accessible at a known address. But the same
is true of the telephone: to be useful for incoming communication, the telephone
must remain constantly linked to the same number (or, when the number is
changed, the system must include some forwarding or notification capability, a
qualification that also applies to computer addresses). Does this suggest that an
unwelcome message delivered through a telephone or fax machine should be
viewed as a trespass to a type of real property? We think not: As already
discussed, the contents of a telephone communication may cause a variety of
injuries and may be the basis for a variety of tort actions (e.g., defamation,
intentional infliction of emotional distress, invasion of privacy), but the injuries are
not to an interest in property, much less real property, and the appropriate tort is
not trespass. [FN7]
FN7. The tort law discussion in Justice Brown's dissenting opinion similarly
suffers from an overreliance on metaphor and analogy. Attempting to find
an actionable trespass, Justice Brown analyzes Intel's e-mail system as
comparable to the exterior of an automobile (dis. opn. of Brown, J., post, 1
Cal.Rptr.3d at pp. 52-53, 71 P.3d at pp. 313-314), a plot of land (id., at pp.
60-61, 71 P.3d at pp. 319-320), the interior of an automobile (p. 62, 71 P.3d
p. 321), a toothbrush (pp. 64-65, 71 P.3d p. 323), a head of livestock (p. 65,
71 P.3d p. 323), and a mooring buoy (pp. 65-66, 71 P.3d pp. 324-325),
while Hamidi is characterized as a vandal damaging a school building (pp.
63-64, 71 P.3d p. 322) or a prankster unplugging and moving employees'
computers (p. 65, 71 P.3d p. 324). These colorful analogies tend to obscure
the plain fact that this case involves communications equipment, used by
defendant to communicate. Intel's e-mail system was equipment designed
for speedy communication between employees and the outside world;
Hamidi communicated with Intel employees over that system in a manner
entirely consistent with its design; and Intel objected not because of an
offense against the integrity or dignity of its computers, but because the
communications themselves affected employee-recipients in a manner Intel
found undesirable. The proposal that we extend trespass to chattels to cover
any communication that the owner of the communications equipment
considers annoying or distracting raises, moreover, concerns about control
over the flow of information and views that would not be presented by, for
example, an injunction against chasing another's cattle or sleeping in her car.
More substantively, Professor Epstein argues that a rule of computer server
inviolability will, through the formation or extension of a market in computer-to-
36
computer access, create "the right social result." In most circumstances, he
predicts, companies with computers on the Internet will continue to authorize
transmission of information through e-mail, Web site searching, and page linking
because they benefit by that open access. When a Web site owner does deny
access to a particular sending, searching, or linking computer, a system of "simple
one-on-one negotiations" will arise to provide the necessary individual licenses.
Other scholars are less optimistic about such a complete propertization of the
Internet. Professor Mark Lemley of the University of California, Berkeley, writing on
behalf of an amici curiae group of professors of intellectual property and computer
law, observes that under a property rule of server inviolability, "each of the
hundreds of millions of [Internet] users must get permission in advance from
anyone with whom they want to communicate and anyone who owns a server
through which their message may travel." The consequence for e-mail could be a
substantial reduction in the freedom of electronic communication, as the owner of
each computer through which an electronic message passes could impose its own
limitations on message content or source. As Professor Dan Hunter of the University
of Pennsylvania asks rhetorically: "Does this mean that one must read the 'Terms
of Acceptable Email Usage' of every email system that one emails in the course of
an ordinary day? If the University of Pennsylvania had a policy that sending a joke
by email would be an unauthorized use of their system, then under the logic of [the
lower court decision in this case], you commit 'trespass' if you emailed me a ...
cartoon." (Hunter, Cyberspace as Place, and the Tragedy of the Digital
Anticommons (2003) 91 Cal. L.Rev. 439, 508-509.)
Web site linking, Professor Lemley further observes, "would exist at the
sufferance of the linked-to party, because a Web user who followed a 'disapproved'
link would be trespassing on the plaintiff's server, just as sending an e-mail is
trespass under the [lower] court's theory." Another writer warns that "[c]ybertrespass theory will curtail the free flow of price and product information on the
Internet by allowing website owners to tightly control who and what may enter and
make use of the information housed on its Internet site." (Chang, Bidding on
Trespass: eBay, Inc. v. Bidder's Edge, Inc. and the Abuse of Trespass Theory in
Cyberspace Law (2001) 29 AIPLA Q.J. 445, 459.) A leading scholar of Internet law
and policy, Professor Lawrence Lessig of Stanford University, has criticized
Professor Epstein's theory of the computer server as quasi-real property, previously
put forward in the eBay case (eBay, supra, 100 F.Supp.2d 1058), on the ground
that it ignores the costs to society in the loss of network benefits: "eBay benefits
greatly from a network that is open and where access is free. It is this general
feature of the Net that makes the Net so valuable to users and a source of great
innovation. And to the extent that individual sites begin to impose their own rules
of exclusion, the value of the network as a network declines. If machines must
negotiate before entering any individual site, then the costs of using the network
climb." (Lessig, The Future of Ideas: The Fate of the Commons in a Connected
World (2001) p. 171; see also Hunter, Cyberspace as Place, and the Tragedy of the
Digital Anticommons, supra, 91 Cal. L.Rev. at p. 512 ["If we continue to mark out
anticommons claims in cyberspace, not only will we preclude better, more
innovative uses of cyberspace resources, but we will lose sight of what might be
37
possible"].)
We discuss this debate among the amici curiae and academic writers only to
note its existence and contours, not to attempt its resolution. Creating an absolute
property right to exclude undesired communications from one's e-mail and Web
servers might help force spammers to internalize the costs they impose on ISP's
and their customers. But such a property rule might also create substantial new
costs, to e-mail and e-commerce users and to society generally, in lost ease and
openness of communication and in lost network benefits. In light of the unresolved
controversy, we would be acting rashly to adopt a rule treating computer servers as
real property for purposes of trespass law.
The Legislature has already adopted detailed regulations governing UCE.
(Bus. & Prof.Code, § § 17538.4, 17538.45; see generally Ferguson v.
Friendfinders, Inc., supra, 94 Cal.App.4th 1255, 115 Cal.Rptr.2d 258.) It may see
fit in the future also to regulate noncommercial e-mail, such as that sent by Hamidi,
or other kinds of unwanted contact between computers on the Internet, such as
that alleged in eBay, supra, 100 F.Supp.2d 1058. But we are not persuaded that
these perceived problems call at present for judicial creation of a rigid property rule
of computer server inviolability. We therefore decline to create an exception,
covering Hamidi's unwanted electronic messages to Intel employees, to the general
rule that a trespass to chattels is not actionable if it does not involve actual or
threatened injury to the personal property or to the possessor's legally protected
interest in the personal property. No such injury having been shown on the
undisputed facts, Intel was not entitled to summary judgment in its favor.
III. Constitutional Considerations
Because we conclude no trespass to chattels was shown on the summary
judgment record, making the injunction improper on common law grounds, we
need not address at length the dissenters' constitutional arguments. A few
clarifications are nonetheless in order.
Justice Mosk asserts that this case involves only "a private entity seeking to
enforce private trespass rights." (Dis. opn. of Mosk, J., post, 1 Cal.Rptr.3d at p. 74,
71 P.3d at p. 331.) But the injunction here was issued by a state court. While a
private refusal to transmit another's electronic speech generally does not implicate
the First Amendment, because no governmental action is involved (see Cyber
Promotions, Inc. v. American Online, Inc. (E.D.Penn.1996) 948 F.Supp. 436, 441445 [spammer could not force private ISP to carry its messages] ), the use of
government power, whether in enforcement of a statute or ordinance or by an
award of damages or an injunction in a private lawsuit, is state action that must
comply with First Amendment limits. (Cohen v. Cowles Media Co. (1991) 501 U.S.
663, 668, 111 S.Ct. 2513, 115 L.Ed.2d 586; NAACP v. Claiborne Hardware Co.
(1982) 458 U.S. 886, 916, fn. 51, 102 S.Ct. 3409, 73 L.Ed.2d 1215; New York
Times v. Sullivan (1964) 376 U.S. 254, 265, 84 S.Ct. 710, 11 L.Ed.2d 686.) Nor
does the nonexistence of a "constitutional right to trespass" (dis. opn. of Mosk, J.,
post, 1 Cal.Rptr.3d at p. 74, 71 P.3d at p. 331) make an injunction in this case per
38
se valid. Unlike, for example, the trespasser-to-land defendant in Church of Christ
in Hollywood v. Superior Court (2002) 99 Cal.App.4th 1244, 121 Cal.Rptr.2d 810,
Hamidi himself had no tangible presence on Intel property, instead speaking from
his own home through his computer. He no more invaded Intel's property than
does a protester holding a sign or shouting through a bullhorn outside corporate
headquarters, posting a letter through the mail, or telephoning to complain of a
corporate practice. (See Madsen v. Women's Health Center (1994) 512 U.S. 753,
765, 114 S.Ct. 2516, 129 L.Ed.2d 593 [injunctions restraining such speakers must
" burden no more speech than necessary to serve a significant government
interest"].) [FN8]
FN8. Justice Brown would distinguish Madsen v. Women's Health Center,
supra, on the ground that the operators of the health center in that case
would not have been entitled to "drive[ ] [the protesters] from the public
streets," whereas Intel was entitled to block Hamidi's messages as best it
could. (Dis. opn. of Brown, J., post, 1 Cal.Rptr.3d at p. 55, fn. 1, 71 P.3d at
p. 315, fn. 1.) But the health center operators were entitled to block
protesters' messages--as best they could--by closing windows and pulling
blinds. That a property owner may take physical measures to prevent the
transmission of others' speech into or across the property does not imply
that a court order enjoining the speech is not subject to constitutional
limitations.
Justice Brown relies upon a constitutional "right not to listen," rooted in the
listener's "personal autonomy" (dis. opn. of Brown, J., post, 1 Cal.Rptr.3d at p. 58,
71 P.3d at p. 318), as compelling a remedy against Hamidi's messages, which she
asserts were sent to "unwilling" listeners (id., at p. 54, 71 P.3d at p. 315). Even
assuming a corporate entity could under some circumstances claim such a personal
right, here the intended and actual recipients of Hamidi's messages were individual
Intel employees, rather than Intel itself. The record contains no evidence Hamidi
sent messages to any employee who notified him such messages were unwelcome.
In any event, such evidence would, under the dissent's rationale of a right not to
listen, support only a narrow injunction aimed at protecting individual recipients
who gave notice of their rejection. (See Bolger v. Youngs Drug Products Corp.
(1983) 463 U.S. 60, 72, 103 S.Ct. 2875, 77 L.Ed.2d 469 [government may not act
on behalf of all addressees by generally prohibiting mailing of materials related to
contraception, where those recipients who may be offended can simply ignore and
discard the materials]; Martin v. City of Struthers (1943) 319 U.S. 141, 144, 63
S.Ct. 862, 87 L.Ed. 1313 [anti- canvassing ordinance improperly "substitutes the
judgment of the community for the judgment of the individual householder"]; cf.
Rowan v. U.S. Post Office Dept. (1970) 397 U.S. 728, 736, 90 S.Ct. 1484, 25
L.Ed.2d 736 ["householder" may exercise "individual autonomy" by refusing
delivery of offensive mail].) The principle of a right not to listen, founded in
personal autonomy, cannot justify the sweeping injunction issued here against all
communication to Intel addresses, for such a right, logically, can be exercised only
by, or at the behest of, the recipient himself or herself.
39
DISPOSITION
The judgment of the Court of Appeal is reversed.
WE CONCUR: Kennard, Moreno and Perren [FN*], JJ.
FN* Associate Justice of the Court of Appeal, Second Appellate District,
Division Six, assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
Concurring Opinion by KENNARD, J.
I concur.
Does a person commit the tort of trespass to chattels by making occasional
personal calls to a mobile phone despite the stated objection of the person who
owns the mobile phone and pays for the mobile phone service? Does it matter that
the calls are not made to the mobile phone's owner, but to another person who
ordinarily uses that phone? Does it matter that the person to whom the calls are
made has not objected to them? Does it matter that the calls do not damage the
mobile phone or reduce in any significant way its availability or usefulness?
The majority concludes, and I agree, that using another's equipment to
communicate with a third person who is an authorized user of the equipment and
who does not object to the communication is trespass to chattels only if the
communications damage the equipment or in some significant way impair its
usefulness or availability.
Intel has my sympathy. Unsolicited and unwanted bulk e-mail, most of it
commercial, is a serious annoyance and inconvenience for persons who
communicate electronically through the Internet, and bulk e-mail that distracts
employees in the workplace can adversely affect overall productivity. But, as the
majority persuasively explains, to establish the tort of trespass to chattels in
California, the plaintiff must prove either damage to the plaintiff's personal property
or actual or threatened impairment of the plaintiff's ability to use that property.
Because plaintiff Intel has not shown that defendant Hamidi's occasional bulk e-mail
messages to Intel's employees have damaged Intel's computer system or impaired
its functioning in any significant way, Intel has not established the tort of trespass
to chattels.
This is not to say that Intel is helpless either practically or legally. As a
practical matter, Intel need only instruct its employees to delete messages from
Hamidi without reading them and to notify Hamidi to remove their workplace e-mail
40
addresses from his mailing lists. Hamidi's messages promised to remove recipients
from the mailing list on request, and there is no evidence that Hamidi has ever
failed to do so. From a legal perspective, a tort theory other than trespass to
chattels may provide Intel with an effective remedy if Hamidi's messages are
defamatory or wrongfully interfere with Intel's economic interests. (See maj. opn.,
ante, 1 Cal.Rptr.3d at p. 37, 71 P.3d at p. 300.) Additionally, the Legislature
continues to study the problems caused by bulk e-mails and other dubious uses of
modern communication technologies and may craft legislation that accommodates
the competing concerns in these sensitive and highly complex areas.
Accordingly, I join the majority in reversing the Court of Appeal's judgment.
Dissenting Opinion of BROWN, J.
Candidate A finds the vehicles that candidate B has provided for his
campaign workers, and A spray paints the water soluble message, "Fight
corruption, vote for A" on the bumpers. The majority's reasoning would find that
notwithstanding the time it takes the workers to remove the paint and the expense
they incur in altering the bumpers to prevent further unwanted messages,
candidate B does not deserve an injunction unless the paint is so heavy that it
reduces the cars' gas mileage or otherwise depreciates the cars' market value.
Furthermore, candidate B has an obligation to permit the paint's display, because
the cars are driven by workers and not B personally, because B allows his workers
to use the cars to pick up their lunch or retrieve their children from school, or
because the bumpers display B's own slogans. I disagree.
Intel has invested millions of dollars to develop and maintain a computer
system. It did this not to act as a public forum but to enhance the productivity of
its employees. Kourosh Kenneth Hamidi sent as many as 200,000 e-mail messages
to Intel employees. The time required to review and delete Hamidi's messages
diverted employees from productive tasks and undermined the utility of the
computer system. "There may ... be situations in which the value to the owner of a
particular type of chattel may be impaired by dealing with it in a manner that does
not affect its physical condition." (Rest.2d Torts, § 218, com. h, p. 422.) This is
such a case.
The majority repeatedly asserts that Intel objected to the hundreds of
thousands of messages solely due to their content, and proposes that Intel seek
relief by pleading content-based speech torts. This proposal misses the point that
Intel's objection is directed not toward Hamidi's message but his use of Intel's
property to display his message. Intel has not sought to prevent Hamidi from
expressing his ideas on his Web site, through private mail (paper or electronic) to
employees' homes, or through any other means like picketing or billboards. But as
counsel for Intel explained during oral argument, the company objects to Hamidi's
using Intel's property to advance his message.
Of course, Intel deserves an injunction even if its objections are based
41
entirely on the e-mail's content. Intel is entitled, for example, to allow employees
use of the Internet to check stock market tables or weather forecasts without
incurring any concomitant obligation to allow access to pornographic Web sites.
**314(Loving v. Boren (W.D.Okla. 1997) 956 F.Supp. 953, 955.) A private
property owner may choose to exclude unwanted mail for any reason, including its
content. (Rowan v. U.S. Post Office Dept. (1970) 397 U.S. 728, 738, 90 S.Ct.
1484, 25 L.Ed.2d 736 (Rowan ); Tillman v. Distribution Systems of America Inc.
(1996) 224 A.D.2d 79, 648 N.Y.S.2d 630, 635 (Tillman ).)
The majority refuses to protect Intel's interest in maintaining the integrity of
its own system, contending that: (1) Hamidi's mailings did not physically injure the
system; (2) Intel receives many unwanted messages, of which Hamidi's are but a
small fraction; (3) Intel must have contemplated that it would receive some
unwanted messages; and (4) Hamidi used the e-mail system for its intended
purpose, to communicate with employees.
Other courts have found a protectible interest under very similar
circumstances. In Thrifty-Tel v. Bezenek (1996) 46 Cal.App.4th 1559, 54
Cal.Rptr.2d 468 (Thrifty-Tel ), the Court of Appeal found a trespass to chattels
where the defendants used another party's access code to search for an
authorization code with which they could make free calls. The defendants' calls did
not damage the company's system in any way; they were a miniscule fraction of
the overall communication conducted by the phone network; and the company
could have reasonably expected that some individuals would attempt to obtain
codes with which to make free calls (just as stores expect shoplifters). Moreover,
had the defendants succeeded in making free calls, they would have been using the
telephone system as intended. (Id. at p. 1563, 54 Cal.Rptr.2d 468.)
Because I do not share the majority's antipathy toward property rights and
believe the proper balance between expressive activity and property protection can
be achieved without distorting the law of trespass, I respectfully dissent.
THE INSTANT FINDING OF A TRESPASS CONFORMS THE LAW ON ELECTRONIC
MAIL TO THAT
OF OTHER FORMS OF COMMUNICATION
The majority endorses the view of the Court of Appeal dissent, and review a
finding of a trespass in this case as a radical decision that will endanger almost
every other form of expression. Contrary to these concerns, the Court of Appeal
decision belongs not to a nightmarish future but to an unremarkable past--a long
line of cases protecting the right of an individual not to receive an unwanted
message after having expressed that refusal to the speaker. It breaks no new legal
ground and follows traditional rules regarding communication.
It is well settled that the law protects a person's right to decide to whom he
will speak, to whom he will listen, and to whom he will not listen. (Martin v. City of
Struthers (1943) 319 U.S. 141, 149, 63 S.Ct. 862, 87 L.Ed. 1313 (Martin ) [noting
the "constitutional rights of those desiring to distribute literature and those desiring
42
to receive it, as well as those who choose to exclude such distributors"].) As the
United States Supreme Court observed, "we have repeatedly held that individuals
are not required to welcome unwanted speech into their homes" (Frisby v. Schultz
(1988) 487 U.S. 474, 485, 108 S.Ct. 2495, 101 L.Ed.2d 420), whether the
unwanted speech comes in the form of a door-to-door solicitor (see Martin, at pp.
147-148, 63 S.Ct. 862), regular "snail" mail (Rowan, supra, 397 U.S. 728, 90 S.Ct.
1484, 25 L.Ed.2d 736), radio waves (FCC v. Pacifica Foundation (1978) 438 U.S.
726, 98 S.Ct. 3026, 57 L.Ed.2d 1073), or other forms of amplified sound (Kovacs v.
Cooper (1949) 336 U.S. 77, 69 S.Ct. 448, 93 L.Ed. 513). (See Frisby v. Schultz, at
p. 485, 108 S.Ct. 2495.)
Of course, speakers have rights too, and thus the result is a balancing:
speakers have the right to initiate speech but the listener has the right to refuse to
listen or to terminate the conversation. This simple policy thus supports Hamidi's
right to send e-mails initially, but not after Intel expressed its objection.
Watchtower Bible and Tract Society v. Village of Stratton (2002) 536 U.S.
150, 122 S.Ct. 2080, 153 L.Ed.2d 205 does not compel a contrary result.
Watchtower follows Martin, supra, 319 U.S. 141, 63 S.Ct. 862, 87 L.Ed. 1313, in
holding that the government may not bar a speaker from a homeowner's door, but
the homeowner surely may. The Martin court invalidated an ordinance that banned
all door-to-door soliciting (in that case the speech was the noncommercial ideas of
a religious sect), even at homes where the residents wished to hear the speech.
This exclusion "substitute[d] the judgment of the community for the judgment of
the individual householder." (Martin, at p. 144, 63 S.Ct. 862.) Instead, the court
authorized the property owner to indicate his desire not to be disturbed. " This or
any similar regulation leaves the decision as to whether distributers of literature
may lawfully call at a home where it belongs--with the homeowner himself." (Id. at
p. 148, 63 S.Ct. 862.) A speaker is entitled to speak with willing listeners but not
unwilling ones. "A city can punish those who call at a home in defiance of the
previously expressed will of the occupant ...." (ibid., italics added.) Watchtower,
supra, 536 U.S. 150, 122 S.Ct. 2080, 153 L.Ed.2d 205, reaffirmed the listener's
complete autonomy to accept or reject offered speech.
Martin further recognized that the decisions regarding whether to accept a
particular message must be made by a nongovernmental actor, but not necessarily
by every single potential listener on an individual level. "No one supposes ... that
the First Amendment prohibits a state from preventing the distribution of leaflets in
a church against the will of the church authorities." (Martin, supra, 319 U.S. at p.
143, 63 S.Ct. 862, italics added.) Unanimity among the congregation is not
required. (See also Church of Christ in Hollywood v. Superior Court (2002) 99
Cal.App.4th 1244, 121 Cal.Rptr.2d 810 (Church of Christ ).) The Supreme Court
reaffirmed this rule in Lloyd Corp. v. Tanner (1972) 407 U.S. 551, 92 S.Ct. 2219,
33 L.Ed.2d 131 (Lloyd ) and ***55Hudgens v. NLRB (1976) 424 U.S. 507, 96
S.Ct. 1029, 47 L.Ed.2d 196, where private shopping mall owners validly excluded
speakers from their malls. The owners could make this decision, even though they
were not the "intended and actual recipients of [the speakers'] messages." (Maj.
opn., ante, 1 Cal.Rptr.3d at p. 51, 71 P.3d at p. 312.) The owners had no obligation
43
to obtain the agreement of every individual store within the mall, or of every
employee within every store in the mall. [FN1]
FN1. The majority distinguishes Church of Christ on its facts, by asserting
that a former church member could be barred from church property because
she had a "tangible presence" on the church's property. (Maj. opn., ante, 1
Cal.Rptr.3d at p. 50, 71 P.3d at p. 311.) But the majority does not refute
the legal point that "the mere judicial enforcement of neutral trespass laws
by the private owner of property does not alone render it a state actor."
(CompuServe, Inc. v. Cyber Promotions, Inc. (S.D.Ohio 1997) 962 F.Supp.
1015, 1026 (CompuServe ).)
The First Amendment does not shield Hamidi's speech, and the majority's
authorities do not suggest it does. On the contrary, the high court
recognized that the First Amendment does not preclude generally applicable
laws, even where they incidentally restrict speech. (Cohen v. Cowles Media
Co. (1991) 501 U.S. 663, 669, 111 S.Ct. 2513, 115 L.Ed.2d 586.) There is
thus no right to intrude upon privately owned property simply to generate
speech. (Ibid.)
The majority cites New York Times Co. v. Sullivan (1964) 376 U.S. 254, 84
S.Ct. 710, 11 L.Ed.2d 686, as well as N.A.A.C.P. v. Claiborne Hardware Co.
(1982) 458 U.S. 886, 102 S.Ct. 3409, 73 L.Ed.2d 1215, and Madsen v.
Women's Health Center, Inc. (1994) 512 U.S. 753, 114 S.Ct. 2516, 129
L.Ed.2d 593, none of which are apposite. In these cases, speakers enjoyed
First Amendment protection when they spoke to the public through a
newspaper advertisement (with the newspaper's consent) or a protest on a
public street, a traditional public forum. (Schneider v. State (1939) 308 U.S.
147, 60 S.Ct. 146, 84 L.Ed. 155.) If Hamidi had similarly expressed his antiIntel feelings in a newspaper advertisement or from a public street, these
authorities would be on point. By contrast, nothing in New York Times
entitles a computer hacker to alter an online newspaper's content so that it
expresses the hacker's opinions against the paper's wishes.
Intel's right to use reasonable force (see maj. opn., ante, 1 Cal.Rptr.3d at p.
40, 71 P.3d at p. 303), to prevent interference with its property distinguishes
this case from the majority's United States Supreme Court precedents.
Whereas Intel could attempt to block the unwanted messages, Sullivan, who
claimed to have been libeled by the newspaper, could not have burned the
newspapers to prevent their publication, nor could the targets of the public
protesters in Claiborne Hardware or Madsen have driven them from the
public streets where they were speaking. Contrariwise, Intel, as the majority
does not dispute, would have been allowed to suppress Hamidi's messages if
it had been able to do so.
This rule applies not only to real property but also to chattels like a computer
system. In Loving v. Boren, supra, 956 F.Supp. at page 955, the court held that
the University of Oklahoma could restrict the use of its computer system to exclude
pornographic messages, notwithstanding the contrary preferences of any individual
44
faculty member (or student). Intel may similarly control the use of its own
property, regardless of any specific employee's contrary wishes. (See also Bus. &
Prof.Code, § 17538.4, subd. (h).) In any event, Hamidi had ample opportunity in
his preobjection e-mails to direct employees to his Web site or request the
employees' private e-mail addresses. He thus continues to use the internal Intel
network to speak to an unreceptive audience. [FN2]
FN2. Hamidi required employees to take affirmative steps to remove
themselves from the mailing list. Not only might some employees have
declined to do so because such removal might involve a greater burden than
simply deleting the unwanted message, but they also might reasonably have
assumed that such requests could be counterproductive. (Whang, An
Analysis of California's Common and Statutory Law Dealing with Unsolicited
Commercial Electronic Mail: An Argument for Revision (2000) 37 San Diego
L.Rev. 1201, 1205-1206 (Whang).) " 'Don't respond [to spam]! Don't ask
them to "take you off a list." People who respond--even negatively--are
viewed as Grade A targets. You will probably get more junk than ever.' " (Id.
at p. 1206 & fn. 24, quoting Campbell, Waging War on Internet Spammers,
Toronto Star (Aug. 26, 1999) p. L5.)
Accordingly, all that matters is that Intel exercised the right recognized in
Martin to exclude unwanted speech. The instant case is considerably easier than
Lloyd and Hudgens in light of the severe infringement on Intel's autonomy.
Whereas the mall owners had been asked merely to allow others to speak, Intel,
through its server, must itself actively "participate in the dissemination of an
ideological message by displaying it on ... private property in a manner and for the
express purpose that it be observed and read...." (Wooley v. Maynard (1977) 430
U.S. 705, 713, 97 S.Ct. 1428, 51 L.Ed.2d 752.)
The principle that a speaker's right to speak to a particular listener exists for
only so long as the listener wishes to listen applies also to mail delivery. (Rowan,
supra, 397 U.S. 728, 90 S.Ct. 1484, 25 L.Ed.2d 736.) In Bolger v. Youngs Drug
Products Corp. (1983) 463 U.S. 60, 103 S.Ct. 2875, 77 L.Ed.2d 469 (Bolger ), the
court struck down a law barring the mailing of information regarding contraception
because the government was deciding which messages could be delivered. But
Bolger cited Rowan with approval--a case that upheld the procedure by which
private parties could refuse to receive specific materials. "[A] sufficient measure of
individual autonomy must survive to permit every householder to exercise control
over unwanted mail." (Rowan, supra, 397 U.S. at p. 736, 90 S.Ct. 1484.) Citing
Martin, supra, 319 U.S. 141, 63 S.Ct. 862, 87 L.Ed. 1313, Rowan held "a mailer's
right to communicate must stop at the mailbox of an unreceptive addressee.... [¶ ]
... [¶ ] To hold less would tend to license a form of trespass." (Rowan, at pp. 736737, 90 S.Ct. 1484, italics added.) Furthermore, Bolger expressly contemplated
that some family members would exclude materials on behalf of others; the right
to accept or reject speech thus belonged to the household, not each individual
member. (Bolger, at p. 73, 103 S.Ct. 2875.)
45
The pertinent precedent for an anti-spam case is Rowan, which involved
private action, not Bolger, which involved governmental action. " '[H]ere we are
not dealing with a government agency which seeks to preempt in some way the
ability of a publisher to contact a potential reader; rather, we are dealing with a
reader who is familiar with the publisher's product, and who is attempting to
prevent the unwanted dumping of this product on his property." (CompuServe,
supra, 962 F.Supp. at p. 1027, quoting Tillman, supra, 648 N.Y.S.2d at p. 635.)
Rowan further held the recipient could reject a message for any subjective
reason, including annoyance or discomfort at its content. (Rowan, supra, 397 U.S.
at p. 738, 90 S.Ct. 1484.) A private actor thus has no obligation to hear all
messages just because he chooses to hear some. A homeowner's desire to receive
letters from relatives or friends does not compel him to accept offensive
solicitations. It is therefore possibly true but certainly immaterial that Intel might
have expected that some unwanted messages would be sent to its employees. A
store that opens its doors to the public should reasonably expect some individuals
will attempt to shoplift, but the store does not thereby incur an obligation to accept
their presence and the disruption they cause.
If we did create an "accept one, accept all" rule, whereby a party's
acceptance of outside mail abrogates the right to exclude any messages, the result
would likely be less speech, not more. Courts have recognized the seeming
paradox that permitting the exclusion of speech is necessary to safeguard it. "It is
ironic that if defendants were to prevail on their First Amendment arguments, the
viability of electronic mail as an effective means of communication for the rest of
society would be put at risk." (CompuServe, supra, 962 F.Supp. at p. 1028.) The
Court of Appeal below likewise observed that employers' tolerance for reasonable
personal use of computers "would vanish if they had no way to limit such personal
usage of company equipment." (Cf. *1373Miami Herald Publishing Co. v. Tornillo
(1974) 418 U.S. 241, 256, 94 S.Ct. 2831, 41 L.Ed.2d 730 [compulsory fair reply
law would deter newspaper from speaking to avoid forced expression of
disagreeable speech].) Furthermore, merely permitting exclusion may be
insufficient absent a mechanism for enforcement. If spamming expands to a new
volume of activity, "[t]he cost increases that would result from a massive increase
in volume could even lead many sites to discontinue supporting standard e-mail
altogether. Within a few years, e-mail may no longer be the near-universal method
for communicating with people via the Internet that it is today." (Sorkin, Technical
and Legal Approaches to Unsolicited Electronic Mail (2001) 35 U.S.F. L.Rev. 325,
338 339, fn. omitted (Sorkin).)
The majority expresses its agreement with the dissent below, which found
that if the lost productivity of Intel's employees serves as the requisite injury, "then
every unsolicited communication that does not further the business's objectives
(including telephone calls) interferes with the chattel.... [¶ ] ... [¶ ] ... Under Intel's
theory, even lovers' quarrels could turn into trespass suits by reason of the receipt
of unsolicited letters or calls from the jilted lover. Imagine what happens after the
angry lover tells her fiancé not to call again and violently hangs up the phone.
46
Fifteen minutes later the phone rings. Her fiancé wishing to make up? No,
trespass to chattel." But just as private citizens may deny access to door-to-door
solicitors or mailers, they may also maintain the integrity of their phone system
from callers they wish to exclude. A telephone, no less than an envelope, may be
an instrument of trespass. (See Thrifty-Tel, Inc., supra, 46 Cal.App.4th at pp.
1566-1567, 54 Cal.Rptr.2d 468.)
Individuals may not commandeer the communications systems of unwilling
listeners, even if the speakers are jilted lovers who wish to reconcile. (People v.
Miguez (Crim.Ct.1990) 147 Misc.2d 482, 556 N.Y.S.2d 231.) [FN3] The Miguez
defendant repeatedly left messages [FN4] on the complainant's answering machine
and pager, "interrupting him in his professional capacity as a doctor." (Id. at p.
232.) It was the disruptive volume (not the specific content) of calls from which
the complainant was entitled to relief. Similarly, an individual could not lawfully
telephone a police department 28 times in 3 hours and 20 minutes to inquire about
a civil matter where the police told him not to call because he was disrupting police
operations. (People v. Smith (App.Div.1977) 89 Misc.2d 789, 392 N.Y.S.2d 968,
969-970.)
FN3. New York further proscribes such conduct as criminal. (People v.
Miguez, supra, 147 Misc.2d 482, 556 N.Y.S.2d 231.)
FN4. Some of the messages reflected a desire to reconcile: " ' "Please don't
hurt me anymore. You've hurt me enough, I still love you." ' " A later call
stated, " ' "Eddie I want to give you my number; even if you don't call me I
want you to have it." ' " (People v. Miguez, supra, 556 N.Y.S.2d at p. 232.)
The law on faxes is even stricter. As faxes shift the costs of speech from the
speaker to the listener, senders of commercial e-mail must obtain prior consent
from the recipient. (47 U.S.C. § 227.) Likewise, the users of automated telephone
dialers also must obtain prior consent where they result in costs to the recipient.
(47 U.S.C. § 227(b)(1)(A)(iii); Missouri ex. rel. Nixon v. American Blast Fax, Inc.
(8th Cir.2003) 323 F.3d 649, 657 (Blast Fax ).) Because e-mail permits mass
unwanted communications without the sender having to bear the costs of postage
or labor, there is a much greater incentive for sending unwanted e-mail, and thus
the potential volume of unwanted e-mail may create even greater problems for
recipients than the smaller volume of unwanted faxes. (Whang, supra, 37 San
Diego L.Rev. at p. 1216 & fn. 112.) In any event, honoring the wishes of a party
who requests the cessation of unwanted telecommunications, whether by phone,
fax or e-mail, does nothing more than apply Martin to today's technology.
(Shannon, Combating Unsolicited Sales Calls: The "Do-Not-Call" Approach to
Solving the Telemarketing Problem (2001) 27 J. Legis. 381, 394.)
Therefore, before the listener objects, the speaker need not fear he is
trespassing. Afterwards, however, the First Amendment principle of respect for
47
personal autonomy compels forbearance. "The Court has traditionally respected
the right of a householder to bar, by order or notice, [speakers] from his property.
See Martin v. City of Struthers, supra,.... In this case the mailer's right to
communicate is circumscribed only by an affirmative act of the addressee giving
notice that he wishes no further mailings from that mailer." (Rowan, supra, 397
U.S. at p. 737, 90 S.Ct. 1484, italics added.) Speakers need not obtain affirmative
consent before speaking, and thus have no reason to fear unexpected liability for
trespass, but they must respect the decisions of listeners once expressed. The First
Amendment protects the right not to listen just as it protects the right to speak.
THE TRIAL COURT CORRECTLY ISSUED THE INJUNCTION
Intel had the right to exclude the unwanted speaker from its property, which
Hamidi does not dispute; he does not argue that he has a to right force unwanted
messages on Intel. The instant case thus turns on the question of whether Intel
deserves a remedy for the continuing violation of its rights. I believe it does, and
as numerous cases have demonstrated, an injunction to prevent a trespass to
chattels is an appropriate means of enforcement.
The majority does not find that Hamidi has an affirmative right to have Intel
transmit his messages, but denies Intel any remedy. Admittedly, the case would
be easier if precise statutory provisions supported relief, but in the rapidly changing
world of technology, in which even technologically savvy providers like America
Online and CompuServe are one step behind spammers, the Legislature will likely
remain three or four steps behind. In any event, the absence of a statutory
remedy does not privilege Hamidi's interference with Intel's property. Nor are
content-based speech torts adequate for violations of property rights unrelated to
the speech's content. In any event, the possibility of another avenue for relief does
not preclude an injunction for trespass to chattels.
The majority denies relief on the theory that Intel has failed to establish the
requisite actual injury. As discussed, post, however, the injunction was properly
granted because the rule requiring actual injury pertains to damages, not equitable
relief, and thus courts considering comparable intrusions have provided injunctive
relief without a showing of actual injury. Furthermore, there was actual injury as
(1) Intel suffered economic loss; (2) it is sufficient for the injury to impair the
chattel's utility to the owner rather than the chattel's market value; and (3) even
in the absence of any injury to the owner's utility, it is nevertheless a trespass
where one party expropriates for his own use the resources paid for by another.
Harmless Trespasses to Chattels May be Prevented
Defendant Hamidi used Intel's server in violation of the latter's demand to
stop. This unlawful use of Intel's system interfered with the use of the system by
Intel employees. This misconduct creates a cause of action. "[I]t is a trespass to
damage goods or destroy them, to make an unpermitted use of them, or to move
them from one place to another." (Prosser & Keeton on Torts (5th ed. 1984)
Trespass to Chattels, § 14, p. 85, fns. omitted & italics added.) "[T]he unlawful
48
taking away of another's personal property, the seizure of property upon a wrongful
execution, and the appropriation of another's property to one's own use, even for a
temporary purpose, constitute trespasses, although a mere removal of property
without injuring it is not a trespass when done by one acting rightfully." (7 Speiser
et al., American Law of Torts (1990) Trespass, § 23:23, p. 667 (Speiser) fns.
omitted & italics added.)
Regardless of whether property is real or personal, it is beyond dispute that
an individual has the right to have his personal property free from interference.
There is some division among authorities regarding the available remedy,
particularly whether a harmless trespass supports a claim for nominal damages.
The North Carolina Court of Appeal has found there is no damage requirement for a
trespass to chattel. (See Hawkins v. Hawkins (1991) 101 N.C.App. 529, 400 S.E.2d
472, 475.) "A trespass to chattels is actionable per se without any proof of actual
damage. Any unauthorized touching or moving of a chattel is actionable at the suit
of the possessor of it, even though no harm ensues." (Salmond & Heuston, The
Law of Torts (21st ed. 1996) Trespass to Goods, § 6.2, p. 95, fns. omitted.)
Several authorities consider a harmless trespass to goods actionable per se only if it
is intentional. (Winfield & Jolowicz on Torts (10th ed. 1975) Trespass to Goods, p.
403 (Winfield & Jolowicz); Clerk & Lindsell on Torts (17th ed.1995) ¶ 13-159, p.
703.) The Restatement Second of Torts, section 218, which is less inclined to
favor liability, likewise forbids unauthorized use and recognizes the inviolability of
personal property. However, the Restatement permits the owner to prevent the
injury beforehand, or receive compensation afterward, but not to profit from the
trespass through the remedy of damages unrelated to actual harm, which could
result in a windfall. (Thrifty-Tel, supra, 46 Cal.App.4th at p. 1569, 54 Cal.Rptr.2d
468; Whang, supra, 37 San Diego L.Rev. at p. 1223.) "The interest of a possessor
of a chattel in its inviolability, unlike the similar interest of a possessor of land, is
not given legal protection by an action for nominal damages for harmless
intermeddlings with the chattel.... Sufficient legal protection of the possessor's
interest in the mere inviolability of his chattel is afforded by his privilege to use
reasonable force to protect his possession against even harmless interference."
(Rest.2d Torts, § 218, com. e, pp. 421-422, italics added.) Accordingly, the
protection of land and chattels may differ on the question of nominal damages
unrelated to actual injury. The authorities agree, however, that (1) the chattel is
inviolable, (2) the trespassee need not tolerate even harmless interference, and (3)
the possessor may use reasonable force to prevent it. Both California law and the
Restatement authorize reasonable force regardless of whether the property in
question is real or personal. (Civ.Code, § 51; Rest.2d Torts, § 77.)
The law's special respect for land ownership supports liability for damages
even without actual harm. (Speiser, supra, § 23:1, at p. 592.) By contrast, one
who suffers interference with a chattel may prevent the interference before or
during the fact, or recover actual damages (corresponding to the harm suffered),
but at least according to the Restatement, may not recover damages in excess of
those suffered. But the Restatement expressly refutes defendant's assertion that
only real property is inviolable. From the modest distinction holding that only
victims of a trespass to land may profit in the form of damages exceeding actual
49
harm, defendant offers the position that only trespasses to land may be prevented.
The law is to the contrary; numerous cases have authorized injunctive relief to
safeguard the inviolability of personal property.
The law favors prevention over posttrespass recovery, as it is permissible to
use reasonable force to retain possession of a chattel but not to recover it after
possession has been lost. (See 1 Dobbs, The Law of Torts (2001) § § 76, 81, pp.
170, 186; see also Deevy v. Tassi (1942) 21 Cal.2d 109, 118-119, 130 P.2d 389.)
Notwithstanding the general rule that injunctive relief requires a showing of
irreparable injury (5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 782, p.
239), Witkin also observes there are exceptions to this rule where injunctive relief
is appropriate; these include repetitive trespasses. (Id., § 784, p. 242.) The first
case cited in that section, Mendelson v. McCabe (1904) 144 Cal. 230, 77 P. 915
(Mendelson ), is apposite to our analysis.
In entering McCabe's property, Mendelson exceeded the scope of the consent
he received to do so. McCabe had granted Mendelson the right to pass through his
property on condition that Mendelson close the gates properly, which he did not do.
(Mendelson, supra, 144 Cal. at pp. 231-232, 77 P. 915.) McCabe "did not allege
that any actual damage had been caused by the acts of [Mendelson] ... in leaving
the gates open." (Id. at p. 232, 77 P. 915.) After finding that Mendelson planned
to continue his conduct over McCabe's objection, we authorized injunctive relief.
(Id. at pp. 233-234, 77 P. 915.) Our analysis in Mendelson applies here as well.
"The right to an injunction is not always defeated by the mere absence of
substantial damage from the acts sought to be enjoined. The acts of the plaintiff in
leaving the gates open, if persisted in as he threatened, will constitute a continual
invasion of the right of the defendant to maintain the gates.... Moreover, the only
remedy, other than that of an injunction, for the injury arising from such continued
trespass, would be an action against the plaintiff for damages upon each occasion
when he left the gates open. The damage in each case would be very small,
probably insufficient to defray the expenses of maintaining the action not
recoverable as costs. Such remedy is inadequate and would require numerous
petty suits, which it is not the policy of the law to encourage." (Id. at pp. 232-233,
77 P. 915.)
Our decision thus noted that injunctive relief was proper, regardless of actual
injury (1) if it is necessary to protect the trespassee's right to control his property,
or (2) if suits for damages are impractical, because no individual suit would be
worthwhile. Accordingly, we reiterated the rule that " '[a] trespass of a continuing
nature, whose constant recurrence renders the remedy at law inadequate, unless
by a multiplicity of suits, affords sufficient ground for relief.' " (Mendelson, supra,
144 Cal. at p. 233, 77 P. 915.) Both Mendelson grounds support an injunction
here.
"Injunction is a proper remedy against threatened repeated acts of trespass
... particularly where the probable injury resulting therefrom will be 'beyond any
method of pecuniary estimation,' and for this reason irreparable." [FN5] (Uptown
Enterprises v. Strand (1961) 195 Cal.App.2d 45, 52, 15 Cal.Rptr. 486; see also id.
50
at p. 52, 15 Cal.Rptr. 486 [an otherwise lawful "entry for the purpose of harassing
the owner, giving his business a bad reputation ... or unjustifiably interfering with
the business relations between him and his patrons is unauthorized, wrongful and
actionable"].) Although Mendelson and Uptown Enterprises concerned real
property, the principles of safeguarding a party's possessory interest in property
and of not encouraging repetitive litigation apply no less to trespasses to chattels.
Accordingly, several courts have issued injunctive relief to prevent interference with
personal property.
FN5. The majority asserts Intel was not deprived of its computers "for any
measurable length of time" (maj. opn., ante, 1 Cal.Rptr.3d at p. 41, 71 P.3d
at p. 303), which supposedly fits this case within the rule that a " 'mere
momentary or theoretical' " deprivation is insufficient to establish a trespass
to chattel (maj. opn., ante, at p. 44, 71 P.3d at p. 306). There is a chasm
between the two descriptions. The time needed to identify and delete
200,000 e-mail messages is not capable of precise estimation, but it is hardly
theoretical or momentary. Most people have no idea of how many words
they spoke yesterday, but that does not render the figure de minimis.
In 1996, the Appellate Division of the New York Supreme Court considered
the claim of plaintiff Tillman, who sought to enjoin the unwanted delivery of a
newspaper onto his property. (Tillman, supra, 224 A.D.2d 79, 648 N.Y.S.2d 630.)
He offered no specific critique of the newspaper's content, observing only " '[t]here
is no reason that we have to clean up [defendant's] mess.' " (Id. at p. 632.) Citing
Rowan, Martin, and Lloyd, the court rejected the defendants' argument "that there
is nothing a homeowner can do to stop the dumping on his or her property of
pamphlets or newspapers, no matter how offensive they might be," and instead
upheld Tillman's right to prevent the mail's delivery, regardless of whether his
objection was due to the quantity (volume) or quality (content) of the messages.
(Tillman, at p. 636.) In authorizing injunctive relief, the Tillman court found no
need to quantify the actual damage created by the delivery; it merely **321
noted that the homeowner should not be forced either "to allow such unwanted
newspapers to accumulate, or to expend the time and energy necessary to gather
and to dispose of them." (Ibid.) Subsequent courts have extended this policy to
the delivery of e-mail as well.
The CompuServe court followed Tillman in authorizing an injunction to
prevent the delivery of unwanted e-mail messages. (CompuServe, supra, 962
F.Supp. 1015.) The majority summarily distinguishes CompuServe and its progeny
by noting there the "plaintiff showed, or was prepared to show, some interference
with the efficient functioning of its computer system." (Maj. opn., ante, 1
Cal.Rptr.3d at p. 42, 71 P.3d at p. 304.) But although CompuServe did note the
impairment imposed by the defendant's unsolicited e- mail, this was not part of its
holding. Just before beginning its analysis, the court summarized its ruling without
mentioning impairment. " [T]his Court holds that where defendants engaged in a
course of conduct of transmitting a substantial volume of electronic data in the form
51
of unsolicited e-mail to plaintiff's proprietary computer equipment, where
defendants continued such practice after repeated demands to cease and desist,
and where defendants deliberately evaded plaintiff's affirmative efforts to protect its
computer equipment from such use, plaintiff has a viable claim for trespass to
personal property and is entitled to injunctive relief to protect its property."
(CompuServe, supra, 962 F.Supp. at p. 1017.) The cited criteria apply fully to
Hamidi's conduct. Likewise, the conclusion of CompuServe's analysis fully applies
here: "Defendants' intentional use of plaintiff's proprietary computer equipment
exceeds plaintiff's consent and, indeed, continued after repeated demands that
defendants cease. Such use is an actionable trespass to plaintiff's chattel." (Id. at
p. 1027.)
Post-CompuServe case law has emphasized that unauthorized use of
another's property establishes a trespass, even without a showing of physical
damage. "Although eBay appears unlikely to be able to show a substantial
interference at this time, such a showing is not required. Conduct that does not
amount to a substantial interference with possession, but which consists of
intermeddling with or use of another's personal property, is sufficient to establish a
cause of action for trespass to chattel." (eBay, Inc. v. Bidder's Edge, Inc.
(N.D.Cal.2000) 100 F.Supp.2d 1058, 1070.) [FN6] "While the eBay decision could
be read to require an interference that was more than negligible, ... this Court
concludes that eBay, in fact, imposes no such requirement. Ultimately, the court in
that case concluded that the defendant's conduct was sufficient to establish a cause
of action for trespass not because the interference was 'substantial' but simply
because the defendant's conduct amounted to 'use' of Plaintiff's computer."
(Oyster Software, Inc. v. Forms Processing, Inc. (N.D.Cal., Dec. 6, 2001, No. C-000724 JCS) 2001 WL 1736382 at *13.) An intruder is not entitled to sleep in his
neighbor's car, even if he does not chip the paint.
FN6. The majority asserts eBay does require impairment, because the
opinion noted that the wide replication of the defendant's conduct would
likely impair the functioning of the plaintiff's system. (Maj. opn., ante, 1
Cal.Rptr.3d at pp. 42-43, 71 P.3d at pp. 305-306.) Of course, the "wide
replication" of Hamidi's conduct would likely impair Intel's operating system.
Accordingly, a diluted "likely impairment through wide replication" standard
would favor Intel, not Hamidi.
Hamidi concedes Intel's legal entitlement to block the unwanted messages. The
problem is that although Intel has resorted to the cyberspace version of reasonable
force, it has so far been unsuccessful in determining how to resist the unwanted
use of its system. Thus, while Intel has the legal *1380 right to exclude Hamidi
from its system, it does not have the physical ability. It may forbid Hamidi's use,
but it can not prevent it.
To the majority, Hamidi's ability to outwit Intel's cyber defenses justifies denial of
Intel's claim to exclusive use of its property. Under this reasoning, it is not right
52
but might that determines the extent of a party's possessory interest. Although the
world often works this way, the legal system should not.
Intel Suffered Injury
Even if CompuServe and its progeny deem injury a prerequisite for injunctive
relief, such injury occurred here. Intel suffered not merely an affront to its
dignitary interest in ownership but tangible economic loss. Furthermore,
notwithstanding ***63 the calendar's doubts, it is entirely consistent with the
Restatement and case law to recognize a property interest in the subjective utility
of one's property. Finally, case law further recognizes as actionable the loss that
occurs when one party maintains property for its own use and another party uses
it, even if the property does not suffer damage as a result.
Intel Suffered Economic Loss
Courts have recognized the tangible costs imposed by the receipt of unsolicited
bulk e-mail (UBE). [FN7] Approximately 10 percent of the cost of Internet access
arises from the delivery of UBE, because networks must expand to ensure their
functioning will not be disturbed by the unwanted messages and must design
software to reduce the flood of spam. (Whang, supra, 37 San Diego L.Rev. at pp.
1203 & fn. 10, 1207 & fn. 37.) Especially where bulk e-mailers mask the true
content of their messages in the "header" (as Hamidi did), there is a shift in costs
from sender to recipient that resembles " 'sending junk mail with postage due or
making telemarketing calls to someone's pay-per-minute cellular phone.' "
(Ferguson v. Friendfinders (2002) 94 Cal.App.4th 1255, 1268, 115 Cal.Rptr.2d 258
(Ferguson ), quoting State v. Heckel (2001) 143 Wash.2d 824, 24 P.3d 404, 410
(Heckel ).) E- mail may be cheaper and more efficient than other means of
communication, but "[t]here is no constitutional requirement that the incremental
cost of sending massive quantities of unsolicited [messages] must be borne by the
recipients." (CompuServe, supra, 962 F.Supp. at p. 1026.)
FN7. There is considerable debate regarding whether "spam" encompasses
only unsolicited commercial e-mail (UCE) or all UBE, regardless of its
commercial nature. (Sorkin, supra, 35 U.S.F. L.Rev at pp. 333- 335.)
Because parties object to spam due to its volume rather than the sender's
motivation, UBE is a preferable definition. (Id. at p. 335.) Moreover, as our
decision in Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 119 Cal.Rptr.2d 296,
45 P.3d 243 made plain, there is no bright-line distinction between
commercial and noncommercial speech. (See also City of Cincinnati v.
Discovery Network, Inc. (1993) 507 U.S. 410, 419, 113 S.Ct. 1505, 123
L.Ed.2d 99.)
The Ferguson court noted the tangible economic loss to employers created by
unwanted e-mail. "Individuals who receive UCE can experience increased Internet
access fees because of the time required to sort, read, discard, and attempt to
53
prevent future sending of UCE. If the individual undertakes this process at work, his
or her employer suffers the financial consequences of the wasted time." (Ferguson,
supra, 94 Cal.App.4th at p. 1267, 115 Cal.Rptr.2d 258, italics added.) CompuServe
likewise observed the recipient of unwanted e-mail must "sift through, at his
expense, all of the messages in order to find the ones he wanted or expected to
receive." (CompuServe, supra, 962 F.Supp. at p. 1023, italics added.) Unwanted
messages also drain the equipment's processing power, and slow down the
transfers of electronic data. (Id. at pp. 1022, 1028.)
The economic costs of unwanted e-mail exist even if Intel employees, unlike
CompuServe subscribers, do not pay directly for the time they spend on the
Internet. No such direct costs appear here, only the opportunity costs of lost time.
But for Intel, "time is money" nonetheless. One justification for the strict rule
against unsolicited faxes is that they "shift costs to the recipients who are forced to
contribute ink, paper, wear on their fax machines, as well as personnel time."
(Blast Fax, supra, 323 F.3d at p. 652, italics added.) (In re Johnny M. (2002) 100
Cal.App.4th 1128, 123 Cal.Rptr.2d 316 [vandalism that diverted salaried employees
from ordinary duties caused economic loss through lost work product].)
Courts have also recognized the harm produced by unwanted paper mail. Mail
sent in violation of a request to stop creates the "burdens of scrutinizing the mail
for objectionable material and possible harassment." (Rowan, supra, 397 U.S. at p.
735, 90 S.Ct. 1484, italics added.) The Tillman court thus held a newspaper could
not compel unwilling recipients "to spend their own time or money unwillingly
participating in the distribution process by which a newspaper travels from the
printing press to its ultimate destination, i.e., disposal." (Tillman, supra, 648
N.Y.S.2d at p. 636, italics added.) [FN8]
FN8. Citing to Bolger, supra, 463 U.S. at page 72, 103 S.Ct. 2875, for the
proposition that the Constitution imposes on recipients the burden of
disposing of unwanted mail, is inapposite because, as explained in part I,
ante, Bolger involved the government's objections to the delivery, not the
objection of a nongovernmental actor like Intel, which, under Rowan, supra,
397 U.S at pages 736-738, 90 S.Ct. 1484, may exclude unwanted mail.
Although Hamidi claims he sent only six e-mails, he sent them to between
8,000 and 35,000 employees, thus sending from 48,000 to 210,000 messages.
Since it is the effect on Intel that is determinative, it is the number of messages
received, not sent, that matters. In any event, Hamidi sent between 48,000 and
210,000 messages; the "six" refers only to the number of distinct texts Hamidi
sent. Even if it takes little time to determine the author of a message and then
delete it, this process, multiplied hundreds of thousands of times, amounts to a
substantial loss of employee time, and thus work product. If Intel received 200,000
messages, and each one could be skimmed and deleted in six seconds, it would
take approximately 333 hours, or 42 business days, to delete them all. In other
words, if Intel hired an employee to remove all unwanted mail, it would take that
54
individual two entire months to finish. (Cf. Tubbs v. Delk (Mo.Ct.App.1996) 932
S.W.2d 454, 456 (Tubbs ) [deprivation of access to chattel for " 'less than five
minutes' " constitutes actionable trespass, although found justified there].)
Intel's Injury is Properly Related to the Chattel
The majority does not dispute that Intel suffered a loss of work product as a
matter of fact, so much as it denies that this loss may constitute the requisite injury
as a matter of law. According to the majority, the reduced utility of the chattel to
the owner does not constitute a sufficiently cognizable injury, which exists only
where the chattel itself suffers injury, i.e., its "market value" falls. The
Restatement and related case law are to the contrary.
The Restatement recognizes that the measure of impairment may be
subjective; a cognizable injury may occur not only when the trespass reduces the
chattel's market value but also when the trespass affects its value to the owner.
"In the great majority of cases, the actor's intermeddling with the chattel impairs
the value of it to the possessor, as distinguished from the mere affront to his
dignity as possessor, only by some impairment of the physical condition of the
chattel. There may, however, be situations in which the value to the owner of a
particular type of chattel may be impaired by dealing with it in a manner that does
not affect its physical condition." (Rest.2d Torts, § 218, com. h, p. 422.)
The Restatement goes on to explain that A's using B's toothbrush could
extinguish its value to B. The brushing constitutes a trespass by impairing the
brush's subjective value to the owner rather than its objective market value.
(Rest.2d Torts, § 218, com. h, p. 422.) Moreover, there can be a trespass even
though the chattel is used as intended--to brush teeth--if it is used by an unwanted
party.
As the Court of Appeal's opinion below indicated, interference with an
owner's ability to use the chattel supports a trespass. The opinion recalled the rule,
which dates back almost 400 years, holding that chasing an owner's animal
amounts to a trespass to chattels. (See, e.g., Farmer v. Hunt (1610) 123 Eng.
Rep. 766; Winfield & Jolowicz, supra, Trespass to Goods, p. 403.) These
authorities do not require injury or damage to the animal; the interference with the
owner's use of the animal suffices to create a trespass. (Winfield & Jolowicz, at p.
40.) Interference is actionable if it "deprives the possessor of the use of that
chattel." (Fleming, The Law of Torts (9th ed. 1998) Trespass, § 4.1, p. 598.)
Moreover, such interference need not permanently deny the owner the ability to
use the chattel--mere delay is enough. (See Tubbs, supra, 932 S.W.2d at p. 456.)
A contemporary version of this interference would occur if a trespasser
unplugged the computers of the entire Intel staff and moved them to a high shelf in
each employee's office or cubicle. The computers themselves would suffer no
damage, but all 35,000 employees would need to take the time to retrieve their
computers and restart them. This would reduce the computers' utility to Intel, for,
like the chased animals, they would not be available for immediate use. If the
55
chasing of a few animals supports a trespass, then so does even minimal
interference with a system used by 35,000 individuals.
CompuServe is in accord, as it observed how a bundle of unwanted messages
decreased the utility of the server. (CompuServe, supra, 962 F.Supp. at p. 1023.)
Here, Intel maintains a possessory interest in the efficient and productive use of its
system--which it spends millions of dollars to acquire and maintain. Hamidi's
conduct has impaired the system's optimal functioning for Intel's business
purposes. As the Restatement supports liability where "harm is caused to ... some
... thing in which the possessor has a legally protected interest" (Rest.2d Torts, §
218, subd. (d)), Hamidi has trespassed upon Intel's chattel.
The Unlawful Use of Another's Property is a Trespass, Regardless of Its Effect
on the Property's Utility to the Owner
Finally, even if Hamidi's interference did not affect the server's utility to Intel,
it would still amount to a trespass. Intel has poured millions of dollars into a
resource that Hamidi has now appropriated for his own use. As noted above, "the
appropriation of another's property to one's own use, even for a temporary
purpose, constitute[s][a] trespass[ ]." (Speiser, supra, § 23:23, p. 667, fn.
omitted.) The use by one party of property whose costs have been paid by another
amounts to an unlawful taking of those resources--even if there is no unjust
enrichment by the trespassing party.
In Buchanan Marine Inc. v. McCormack Sand Co. (E.D.N.Y.1990) 743 F.Supp.
139 (Buchanan ), the plaintiff built and maintained mooring buoys for use by its
own tugboats. Defendants' barges used the buoy over plaintiff's objection. (Id. at
pp. 140-141.) The federal district court found such unlawful use could constitute a
trespass to chattels (if the facts were proved), and thus denied the defendants'
motion for summary judgment. "[D]efendants' meddling with [the buoy] is either a
trespass to a chattel or perhaps a conversion for which [plaintiff] may seek relief in
the form of damages and an injunction." (Id. at pp. 141-142.) There was an
allegation of damage (to plaintiff's barge, not the buoy itself), which could support
a claim for damages, but this was not a prerequisite for injunctive relief. Even if
defendants did not injure the buoys in any way, they still had no right to
expropriate plaintiff's property for their own advantage.
The instant case involves a similar taking. Intel has paid for thousands of
computers, as well as the costs of maintaining a server. [FN9] Like the Buchanan
defendants, Hamidi has likewise acted as a free rider in enjoying the use of not only
Intel's computer system but the extra storage capacity needed to accommodate his
messages. Furthermore, Intel's claim, which does not object to Hamidi's speaking
independently, [FN10] only to his use of Intel's property, resembles that of the
Buchanan plaintiff who "has not sought to prevent others from placing their own
mooring buoys in the Harbor," but only the use of the plaintiff's property. [FN11]
(Buchanan, supra, 743 F.Supp. at p. 142.) Hamidi has thus unlawfully shifted the
costs of his speaking to Intel. (Ferguson, supra, 94 Cal.App.4th at p. 1268, 115
Cal.Rptr.2d 258; Blast Fax, supra, 323 F.3d at p. 652; Heckel, supra, 24 P.3d at
56
p. 410.)
FN9. In fact, Intel pays to maintain a high capacity to ensure that the system
does not crash (or slow down); if Intel had not preempted such harm, there
is no dispute that Hamidi would be liable for damages. As Professor Epstein
cogently observes, Intel is thus being penalized for engaging in preemptive
self-help. According to the majority, Intel would do better by saving its
money and collecting damages after a crash/slowdown.
FN10. Intel does not object to Hamidi's transmitting the same message
through his Web site, e-mail to employees' home computers, snail mail to
their homes, distribution of materials from outside the company's gates, or
any other communication that does not conscript Intel's property into
Hamidi's service. Intel does object to the use of its property, regardless of
its message. Although Intel objected that Hamidi sent antagonistic
messages, Intel would presumably also object if Hamidi sent "blank"
messages that slowed down both the Intel system and the employees who
use it.
FN11. As with the hypothetical toothbrush, the Buchanan defendants used
the buoy for its intended use. (Buchanan, supra, 743 F.Supp. at p. 140.)
Moreover, even such free ridership is not necessary to establish a trespass to
chattels. Had the Thrifty-Tel defendants succeeded in making free telephone calls
without authorization, they would stand in the same position as the Buchanan
defendants. But the record does not show they ever succeeded in making calls for
which another subscriber (or the phone company itself) would have to pay. Thus,
neither injury to the trespassee nor benefit to the trespasser is an element of
trespass to chattel. "[T]respass to chattel has evolved considerably from its
original common law application-- concerning the asportation of another's tangible
property--to include even the unauthorized use of personal property." (Thrifty-Tel,
supra, 46 Cal.App.4th at p. 1566, 54 Cal.Rptr.2d 468.)
As in those cases in which courts have granted injunctions to prevent the
delivery of unwanted mail, paper or electronic, Intel is not attempting to profit from
its trespass action by receiving nominal damages. Rather, it seeks an injunction to
prevent further trespass. Moreover, Intel suffered the requisite injury by losing a
great deal of work product, a harm properly related to the property itself, as well as
the money it spent in maintaining the system, which Hamidi wrongfully
expropriated.
CONCLUSION
Those who have contempt for grubby commerce and reverence for the
57
rarified heights of intellectual discourse may applaud today's decision, but even the
flow of ideas will be curtailed if the right to exclude is denied. As the Napster
controversy revealed, creative individuals will be less inclined to develop intellectual
property if they cannot limit the terms of its transmission. Similarly, if online
newspapers cannot charge for access, they will be unable to pay the journalists and
editorialists who generate ideas for public consumption.
This connection between the property right to objects and the property right
to ideas and speech is not novel. James Madison observed, "a man's land, or
merchandize, or money is called his property." (Madison, Property, Nat. Gazette
(Mar. 27, 1792), reprinted in The Papers of James Madison (Robert A. Rutland et al.
edits.1983) p. 266, quoted in McGinnis, The Once and Future Property-Based Vision
of the First Amendment (1996) 63 U.Chi. L.Rev. 49, 65.) Likewise, "a man has a
property in his opinions and the free communication of them." (Ibid.) Accordingly,
"freedom of speech and property rights were seen simply as different aspects of an
indivisible concept of liberty." (Id. at p. 63.)
The principles of both personal liberty and social utility should counsel us to
usher the common law of property into the digital age.
Dissenting Opinion by MOSK, J. [FN*]
FN* Associate Justice, Court of Appeal, Second Appellate District, Division
Five, assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
The majority hold that the California tort of trespass to chattels does not
encompass the use of expressly unwanted electronic mail that causes no physical
damage or impairment to the recipient's computer system. They also conclude that
because a computer system is not like real property, the rules of trespass to real
property are also inapplicable to the circumstances in this case. Finally, they
suggest that an injunction to preclude mass, noncommercial, unwelcome e-mails
may offend the interests of free communication.
I respectfully disagree and would affirm the trial court's decision. In my
view, the repeated transmission of bulk e-mails by appellant Kourosh Kenneth
Hamidi (Hamidi) to the employees of Intel Corporation (Intel) on its proprietary
confidential e-mail lists, despite Intel's demand that he cease such activities,
constituted an actionable trespass to chattels. The majority fail to distinguish open
communication in the public "commons" of the Internet from unauthorized
intermeddling on a private, proprietary intranet. Hamidi is not communicating in the
equivalent of a town square or of an unsolicited "junk" mailing through the United
States Postal Service. His action, in crossing from the public Internet into a private
intranet, is more like intruding into a private office mailroom, commandeering the
mail cart, and dropping off unwanted broadsides on 30,000 desks. Because Intel's
58
security measures have been circumvented by Hamidi, the majority leave Intel,
which has exercised all reasonable self-help efforts, with no recourse unless he
causes a malfunction or systems "crash." Hamidi's repeated intrusions did more
than merely "prompt[ ] discussions between '[e]xcited and nervous managers' and
the company's human resource department" (maj. opn., ante, 1 Cal.Rptr.3d at p.
38, 71 P.3d at p. 301); they also constituted a misappropriation of Intel's private
computer system contrary to its intended use and against Intel's wishes.
The law of trespass to chattels has not universally been limited to physical
damage. I believe it is entirely consistent to apply that legal theory to these
circumstances--that is, when a proprietary computer system is being used contrary
to its owner's purposes and expressed desires, and self-help has been ineffective.
Intel correctly expects protection from an intruder who misuses its proprietary
system, its nonpublic directories, and its supposedly controlled connection to the
Internet to achieve his bulk mailing objectives-- incidentally, without even having to
pay postage.
I
Intel maintains an intranet--a proprietary computer network--as a tool for
transacting and managing its business, both internally and for external business
communications. [FN1] The network and its servers constitute a tangible entity
that has value in terms of the costs of its components and its function in enabling
and enhancing the productivity and efficiency of Intel's business operations. Intel
has established costly security measures to protect the integrity of its system,
including policies about use, proprietary internal e-mail addresses that it does not
release to the public for use outside of company business, and a gateway for
blocking unwanted electronic mail--a so-called firewall.
FN1. The Oxford English Dictionary defines an intranet as "A local or
restricted computer network; spec. a private or corporate network that uses
Internet protocols. An intranet may (but need not) be connected to the
Internet and be accessible externally to authorized users." (OED Online, new
ed., draft entry, Mar. 2003, <http://dictionary.oed.com/> [as of June 30,
2003]; see also Kokka, Property Rights on an Intranet, 3 Spring 1998 J.
Tech.L. & Policy 3, WL 3 UFLJTLP 3 at *3, *6 [defining an intranet as "an
internal network of computers, servers, routers and browser software
designed to organize, secure, distribute and collect information within an
organization" which in large organizations generally includes a wide range of
services, including e-mail].) Contrary to the majority's assertion, there is
nothing incorrect about characterizing Hamidi's unauthorized bulk e-mails as
intrusions onto Intel's intranet.
The Intel computer usage guidelines, which are promulgated for its
employees, state that the computer system is to be "used as a resource in
conducting business. Reasonable personal use is permitted, but employees are
59
reminded that these resources are the property of Intel and all information on these
resources is also the property of Intel." Examples of personal use that would not
be considered reasonable expressly include "use that adversely affects
productivity." Employee e-mail communications are neither private nor
confidential.
Hamidi, a former Intel employee who had sued Intel and created an
organization to disseminate negative information about its employment practices,
sent bulk electronic mail on six occasions to as many as 35,000 Intel employees on
its proprietary computer system, using Intel's confidential employee e-mail lists and
adopting a series of different origination addresses and encoding strategies to elude
Intel's blocking efforts. He refused to stop when requested by Intel to do so,
asserting that he would ignore its demands: "I don't care. I have grown deaf."
Intel sought injunctive relief, alleging that the disruptive effect of the bulk
electronic mail, including expenses from administrative and management
personnel, damaged its interest in the proprietary nature of its network.
The trial court, in its order granting summary judgment and a permanent
injunction, made the following pertinent findings regarding Hamidi's transmission of
bulk electronic mail: "Intel has requested that Hamidi stop sending the messages,
but Hamidi has refused, and has employed surreptitious means to circumvent
Intel's efforts to block entry of his messages into Intel's system.... [¶ ] ... The email system is dedicated for use in conducting business, including communications
between Intel employees and its customers and vendors. Employee e-mail
addresses are not published for use outside company business.... [¶ ] The intrusion
by Hamidi into the Intel e-mail system has resulted in the expenditure of company
resources to seek to block his mailings and to address employee concerns about the
mailings. Given Hamidi's evasive techniques to avoid blocking, the self help
remedy available to Intel is ineffective." The trial court concluded that "the
evidence establishes (without dispute) that Intel has been injured by diminished
employee productivity and in devoting company resources to blocking efforts and to
addressing employees about Hamidi's e-mails." The trial court further found that
the "massive" intrusions "impaired the value to Intel of its e-mail system."
The majority agree that an impairment of Intel's system would result in an
action for trespass to chattels, but find that Intel suffered no injury. As did the trial
court, I conclude that the undisputed evidence establishes that Intel was
substantially harmed by the costs of efforts to block the messages and diminished
employee productivity. Additionally, the injunction did not affect Hamidi's ability to
communicate with Intel employees by other means; he apparently continues to
maintain a Web site to publicize his messages concerning the company.
Furthermore, I believe that the trial court and the Court of Appeal correctly
determined that the tort of trespass to chattels applies in these circumstances.
The Restatement Second of Torts explains that a trespass to a chattel occurs
if "the chattel is impaired as to its condition, quality, or value " or if "harm is caused
to some ... thing in which the possessor has a legally protected interest." (Rest.2d
Torts, § 218, subds. (b) & (d), p. 420, italics added.) As to this tort, a current
60
prominent treatise on the law of torts explains that "[t]he defendant may interfere
with the chattel by interfering with the plaintiff's access or use" and observes that
the tort has been applied so as "to protect computer systems from electronic
invasions by way of unsolicited email or the like." (1 Dobbs, The Law of Torts
(2001) § 60, pp. 122 123.) Moreover, "[t]he harm necessary to trigger liability for
trespass to chattels can be ... harm to something other than the chattel itself." (Id.
at pp. 124-125; see also 1 Harper et al., The Law of Torts (3d ed.1996 & 2003
supp.) § 2.3, pp. 2:14-2:18.) The Restatement points out that, unlike a possessor
of land, a possessor of a chattel is not given legal protection from harmless
invasion, but "the actor" may be liable if the conduct affects "some other and more
important interest of the possessor." (Rest.2d Torts, § 218, com. (e), p. 421,
italics added.)
The Restatement explains that the rationale for requiring harm for trespass
to a chattel but not for trespass to land is the availability and effectiveness of selfhelp in the case of trespass to a chattel. " Sufficient legal protection of the
possessor's interest in the mere inviolability of his chattel is afforded by his
privilege to use reasonable force to protect his possession against even harmless
interference." (rest.2D torts, § 218, com. (e), p. 422.) obviously, "force" is not
available to prevent electronic trespasses. As shown by Intel's inability to prevent
Hamidi's intrusions, self-help is not an adequate alternative to injunctive relief.
The common law tort of trespass to chattels does not require physical
disruption to the chattel. It also may apply when there is impairment to the
"quality" or "value" of the chattel. (Rest.2d Torts, § 218, subd. (b), p. 420; see
also id., com. (e), pp. 421-422 [liability if "intermeddling is harmful to the
possessor's materially valuable interest in the physical condition, quality, or value
of the chattel"].) Moreover, as we held in Zaslow v. Kroenert (1946) 29 Cal.2d
541, 551, 176 P.2d 1, it also applies "[w]here the conduct complained of does not
amount to a substantial interference with possession or the right thereto, but
consists of intermeddling with or use of or damages to the personal property."
[FN2]
FN2. In Zaslow, we observed that when the trespass involves "intermeddling
with or use of" another's property, the owner "may recover only the actual
damages suffered by reason of the impairment of the property or the loss of
its use." (Zaslow v. Kroenert, supra, 29 Cal.2d at p. 551, 176 P.2d 1.) We
did not state that such damages were a requirement for a cause of action;
nor did we address the availability of injunctive relief.
Here, Hamidi's deliberate and continued intermeddling, and threatened
intermeddling, with Intel's proprietary computer system for his own purposes that
were hostile to Intel, certainly impaired the quality and value of the system as an
internal business device for Intel and forced Intel to incur costs to try to maintain
the security and integrity of its server--efforts that proved ineffective. These
included costs incurred to mitigate injuries that had already occurred. It is not a
61
matter of "bootstrapp[ing]" (maj. opn., ante, 1 Cal.Rptr.3d at p. 46, 71 P.3d at p.
308) to consider those costs a damage to Intel. Indeed, part of the value of the
proprietary computer system is the ability to exclude intermeddlers from entering it
for significant uses that are disruptive to its owner's business operations.
If Intel, a large business with thousands of former employees, is unable to
prevent Hamidi from continued intermeddling, it is not unlikely that other outsiders
who obtain access to its proprietary electronic mail addresses would engage in
similar conduct, further reducing the value of, and perhaps debilitating, the
computer system as a business productivity mechanism. Employees understand
that a firewall is in place and expect that the messages they receive are from
senders permitted by the corporation. Violation of this expectation increases the
internal disruption caused by messages that circumvent the company's attempt to
exclude them. The time that each employee must spend to evaluate, delete or
respond to the message, when added up, constitutes an amount of compensated
time that translates to quantifiable financial damage. [FN3]
FN3. As the recent spate of articles on "spam"--unsolicited bulk e- mail-suggests, the effects on business of such unwanted intrusions are not trivial.
"Spam is not just a nuisance. It absorbs bandwidth and overwhelms Internet
service providers. Corporate tech staffs labor to deploy filtering technology
to protect their networks. The cost is now widely estimated (though all such
estimates are largely guesswork) at billions of dollars a year. The social
costs are immeasurable.... [¶ ] 'Spam has become the organized crime of the
Internet.' ... '[M]ore and more it's becoming a systems and engineering and
networking problem.' " (Gleick, Tangled Up in Spam, N.Y. Times (Feb. 9,
2003) magazine p. 1 < http://www.nytimes.com/2003/02/09/> [as of June
30, 2003]; see also Cooper & Shogren, U.S., States Turn Focus to Curbing
Spam, L.A. Times (May 1, 2003) p. A21, col. 2 ["Businesses are losing
money with every moment that employees spend deleting"]; Turley,
Congress Must Send Spammers a Message, L.A. Times (Apr. 21, 2003) p.
B13, col. 5 ["Spam now costs American businesses about $9 billion a year in
lost productivity and screening"]; Taylor, Spam's Big Bang! (June 16, 2003)
Time magazine, at p. 51 ["The time we spend deleting or defeating spam
costs an estimated $8.9 billion a year in lost productivity"].) But the
occasional spam addressed to particular employees does not pose nearly the
same threat of impaired value as the concerted bulk mailings into one e-mail
system at issue here, which mailings were sent to thousands of employees
with the express purpose of disrupting business as usual.
All of these costs to protect the integrity of the computer system and to deal
with the disruptive effects of the transmissions and the expenditures attributable to
employee time, constitute damages sufficient to establish the existence of a
trespass to chattels, even if the computer system was not overburdened to the
point of a "crash" by the bulk electronic mail.
62
The several courts that have applied the tort of trespass to chattels to
deliberate intermeddling with proprietary computer systems have, for the most
part, used a similar analysis. Thus, the court in CompuServe Inc. v. Cyber
Promotions, Inc. (S.D.Ohio 1997) 962 F.Supp. 1015, 1022, applied the
Restatement to conclude that mass mailings and evasion of the server's filters
diminished the value of the mail processing computer equipment to CompuServe
"even though it is not physically damaged by defendant's conduct." The
inconvenience to users of the system as a result of the mass messages "decrease
[d] the utility of CompuServe's e-mail service" and was actionable as a trespass to
chattels. (Id. at p. 1023.)
The court in America Online, Inc. v. IMS (E.D.Va.1998) 24 F.Supp.2d 548, on
facts similar to those in the present case, also applied the Restatement in a
trespass to chattels claim. There, defendant sent unauthorized e-mails to America
Online's computer system, persisting after receiving notice to desist and causing
the company "to spend technical resources and staff time to 'defend' its computer
system and its membership" against the unwanted messages. (Id. at p. 549.) The
company was not required to show that its computer system was overwhelmed or
suffered a diminution in performance; mere use of the system by the defendant
was sufficient to allow the plaintiff to prevail on the trespass to chattels claim.
Similarly, the court in eBay, Inc. v. Bidder's Edge, Inc. (N.D.Cal.2000) 100
F.Supp.2d 1058 determined that there was a trespass to chattels when the quality
or value of a computer system was diminished by unauthorized "web crawlers,"
[FN4] despite the fact that eBay had not alleged any "particular service disruption"
(id. at p. 1065) or "specific incremental damages" (id. at p. 1063) to the computer
system. Intermeddling with eBay's private property was sufficient to establish a
cause of action: "A trespasser is liable when the trespass diminishes the condition,
quality or value of personal property"; "[e]ven if [defendant's intrusions] use only
a small amount of eBay's computer ... capacity, [defendant] has nonetheless
deprived eBay of the ability to use that portion of its personal property for its own
purposes. The law recognizes no such right to use another's personal property."
(Id. at p. 1071; see also, e.g., Oyster Software, Inc. v. Forms Processing, Inc.
(N.D.Cal. Dec. 6, 2001, No. C-00-0724 JCS) 2001 WL 1736382 at *12-*13
[trespass to chattels claim did not require company to demonstrate physical
damage]; Register.com, Inc. v. Verio, Inc. (S.D.N.Y.2000) 126 F.Supp.2d 238, 250
[accord]; cf. Thrifty-Tel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559, 1566-1567,
54 Cal.Rptr.2d 468 [unconsented electronic access to a computer system
constituted a trespass to chattels].)
FN4. A "web crawler" is a computer program that operates across the
Internet to obtain information from the websites of others. (eBay, Inc. v.
Bidder's Edge, supra, 100 F.Supp.2d at p. 1061, fn. 2.)
These cases stand for the simple proposition that owners of computer
systems, like owners of other private property, have a right to prevent others from
63
using their property against their interests. That principle applies equally in this
case. By his repeated intermeddling, Hamidi converted Intel's private employee email system into a tool for harming productivity and disrupting Intel's workplace.
Intel attempted to put a stop to Hamidi's intrusions by increasing its electronic
screening measures and by requesting that he desist. Only when self-help proved
futile, devolving into a potentially endless joust between attempted prevention and
circumvention, did Intel request and obtain equitable relief in the form of an
injunction to prevent further threatened injury.
The majority suggest that Intel is not entitled to injunctive relief because it
chose to allow its employees access to e-mail through the Internet and because
Hamidi has apparently told employees that he will remove them from his mailing
list if they so request. They overlook the proprietary nature of Intel's intranet
system; Intel's system is not merely a conduit for messages to its employees. As
the owner of the computer system, it is Intel's request that Hamidi stop that must
be respected. The fact that, like most large businesses, Intel's intranet includes
external e-mail access for essential business purposes does not logically mean, as
the majority suggest, that Intel has forfeited the right to determine who has access
to its system. Its intranet is not the equivalent of a common carrier or public
communications licensee that would be subject to requirements to provide service
and access. Just as Intel can, and does, regulate the use of its computer system by
its employees, it should be entitled to control its use by outsiders and to seek
injunctive relief when self-help fails.
The majority also propose that Intel has sufficient avenues for legal relief
outside of trespass to chattels, such as interference with prospective economic
relations, interference with contract, intentional infliction of emotional distress, and
defamation; Hamidi urges that an action for nuisance is more appropriate.
Although other causes of action may under certain circumstances also apply to
Hamidi's conduct, the remedy based on trespass to chattels is the most efficient
and appropriate. It simply requires Hamidi to stop the unauthorized use of
property without regard to the content of the transmissions. Unlike trespass to
chattels, the other potential causes of action suggested by the majority and Hamidi
would require an evaluation of the transmissions' content and, in the case of a
nuisance action, for example, would involve questions of degree and value
judgments based on competing interests. (See Hellman v. La Cumbre Golf &
Country Club (1992) 6 Cal.App.4th 1224, 1230-1231, 8 Cal.Rptr.2d 293; 11 Witkin,
Summary of Cal. Law (9th ed. 1990) Equity, § 153, p. 833; Rest.2d Torts, §
840D).
II
As discussed above, I believe that existing legal principles are adequate to
support Intel's request for injunctive relief. But even if the injunction in this case
amounts to an extension of the traditional tort of trespass to chattels, this is one of
those cases in which, as Justice Cardozo suggested, "[t]he creative element in the
judicial process finds its opportunity and power" in the development of the law.
(Cardozo, Nature of the Judicial Process (1921) p. 165.) [FN5]
64
FN5. "It is revolting to have no better reason for a rule of law than that so it
was laid down in the time of Henry IV." (Holmes, The Path of the Law (1897)
10 Harv.L.Rev. 457, 469.)
The law has evolved to meet economic, social, and scientific changes in society.
The industrial revolution, mass production, and new transportation and
communication systems all required the adaptation and evolution of legal doctrines.
The age of computer technology and cyberspace poses new challenges to
legal principles. As this court has said, "the so-called Internet revolution has
spawned a host of new legal issues as courts have struggled to apply traditional
legal frameworks to this new communication medium." (Pavlovich v. Superior
Court (2002) 29 Cal.4th 262, 266, 127 Cal.Rptr.2d 329, 58 P.3d 2.) The court must
now grapple with proprietary interests, privacy, and expression arising out of
computer-related disputes. Thus, in this case the court is faced with "that
balancing of judgment, that testing and sorting of considerations of analogy and
logic and utility and fairness" that Justice Cardozo said he had "been trying to
describe." (Cardozo, Nature of the Judicial Process, supra, at pp. 165-166.)
Additionally, this is a case in which equitable relief is sought. As Bernard Witkin has
written, "equitable relief is flexible and expanding, and the theory that 'for every
wrong there is a remedy' [Civ.Code, § 3523] may be invoked by equity courts to
justify the invention of new methods of relief for new types of wrongs." (11 Witkin,
Summary of Cal. Law, supra, Equity, § 3, p. 681.) That the Legislature has dealt
with some aspects of commercial unsolicited bulk e-mail (Bus. & Prof.Code, § §
17538.4, 17538.45; see maj. opn., ante, 1 Cal.Rptr.3d at p. 50, 71 P.3d at p. 311)
should not inhibit the application of common law tort principles to deal with e-mail
transgressions not covered by the legislation. (Cf. California Assn. of Health
Facilities v. Department of Health Services (1997) 16 Cal.4th 284, 297, 65
Cal.Rptr.2d 872, 940 P.2d 323; I.E. Associates v. Safeco Title Ins. Co. (1985) 39
Cal.3d 281, 285, 216 Cal.Rptr. 438, 702 P.2d 596.)
Before the computer, a person could not easily cause significant disruption to
another's business or personal affairs through methods of communication without
significant cost. With the computer, by a mass mailing, one person can at no cost
disrupt, damage, and interfere with another's property, business, and personal
interests. Here, the law should allow Intel to protect its computer- related property
from the unauthorized, harmful, free use by intruders.
III
As the Court of Appeal observed, connecting one's driveway to the general
system of roads does not invite demonstrators to use the property as a public
forum. Not mindful of this precept, the majority blur the distinction between public
and private computer networks in the interest of "ease and openness of
communication." (Maj. opn., ante, 1 Cal.Rptr.3d at p. 50, 71 P.3d at p. 311.) By
upholding Intel's right to exercise self-help to restrict Hamidi's bulk e-mails, they
65
concede that he did not have a right to send them through Intel's proprietary
system. Yet they conclude that injunctive relief is unavailable to Intel because it
connected its e-mail system to the Internet and thus, "necessarily contemplated"
unsolicited communications to its employees. (Maj. opn., ante, at p. 47, 71 P.3d at
p. 308.) Their exposition promotes unpredictability in a manner that could be as
harmful to open communication as it is to property rights. It permits Intel to block
Hamidi's e-mails entirely, but offers no recourse if he succeeds in breaking through
its security barriers, unless he physically or functionally degrades the system.
By making more concrete damages a requirement for a remedy, the majority
has rendered speech interests dependent on the impact of the e-mails. The sender
will never know when or if the mass e-mails sent by him (and perhaps others) will
use up too much space or cause a crash in the recipient system, so as to fulfill the
majority's requirement of damages. Thus, the sender is exposed to the risk of
liability because of the possibility of damages. If, as the majority suggest, such a
risk will deter "ease and openness of communication" (maj. opn., ante, 1
Cal.Rptr.3d at p. 50, 71 P.3d at p. 311), the majority's formulation does not
eliminate such deterrence. Under the majority's position, the lost freedom of
communication still exists. In addition, a business could never reliably invest in a
private network that can only be kept private by constant vigilance and
inventiveness, or by simply shutting off the Internet, thus limiting rather than
expanding the flow of information. [FN6] Moreover, Intel would have less incentive
to allow employees reasonable use of its equipment to send and receive personal emails if such allowance is justification for preventing restrictions on unwanted
intrusions into its computer system. I believe the best approach is to clearly
delineate private from public networks and identify as a trespass to chattels the
kind of intermeddling involved here.
FN6. Thus, the majority's approach creates the perverse incentive for
companies to invest less in computer capacity in order to protect its
property. In the view of the majority, Hamidi's massive e-mails would be
actionable only if Intel had insufficient server or storage capacity to manage
them.
The views of the amici curiae group of intellectual property professors that a
ruling in favor of Intel will interfere with communication are similarly misplaced
because here, Intel, contrary to most users, expressly informed appellant that it did
not want him sending messages through its system. Moreover, as noted above, all
of the problems referred to will exist under the apparently accepted law that there
is a cause of action if there is some actionable damage.
Hamidi and other amici curiae raise, for the first time on appeal, certain labor
law issues, including the matter of protected labor-related communications. Even
assuming that these issues are properly before this court (see Cal. Rules of Court,
rule 28(c)(1)), to the extent the laws allow what would otherwise be trespasses for
some labor-related communications, my position does not exclude that here too.
66
But there has been no showing that the communications are labor law protected.
[FN7]
FN7. The bulk e-mail messages from Hamidi, a nonemployee, did not purport
to spur employees into any collective action; he has conceded that "[t]his is
not a drive to unionize." Nor was his disruptive conduct part of any bona fide
labor dispute.
Finally, with regard to alleged constitutional free speech concerns raised by
Hamidi and others, this case involves a private entity seeking to enforce private
rights against trespass. Unlike the majority, I have concluded that Hamidi did
invade Intel's property. His actions constituted a trespass--in this case a trespass
to chattels. There is no federal or state constitutional right to trespass. (Adderley
v. Florida (1966) 385 U.S. 39, 47, 87 S.Ct. 242, 17 L.Ed.2d 149 ["Nothing in the
Constitution of the United States prevents Florida from even-handed enforcement
of its general trespass statute...."]; Church of Christ in Hollywood v. Superior Court
(2002) 99 Cal.App.4th 1244, 1253-1254, 121 Cal.Rptr.2d 810 [affirming a
restraining order preventing former church member from entering church property:
"[the United States Supreme Court] has never held that a trespasser or an
uninvited guest may exercise general rights of free speech on property privately
owned"]; see also CompuServe Inc. v. Cyber Promotions, Inc., supra, 962 F.Supp.
at p. 1026 ["the mere judicial enforcement of neutral trespass laws by the private
owner of property does not alone render it a state actor"]; Cyber Promotions, Inc.
v. American Online, Inc. (E.D.Pa.1996) 948 F.Supp. 436, 456 ["a private company
such as Cyber simply does not have the unfettered right under the First
Amendment to invade AOL's private property...."].) Accordingly, the cases cited by
the majority regarding restrictions on speech, not trespass, are not applicable. Nor
does the connection of Intel's e-mail system to the Internet transform it into a
public forum any more than any connection between private and public properties.
Moreover, as noted above, Hamidi had adequate alternative means for
communicating with Intel employees so that an injunction would not, under any
theory, constitute a free speech violation. (Lloyd Corp. v. Tanner (1972) 407 U.S.
551, 568-569, 92 S.Ct. 2219, 33 L.Ed.2d 131.)
IV
The trial court granted an injunction to prevent threatened injury to Intel.
That is the purpose of an injunction. (Ernst & Ernst v. Carlson (1966) 247
Cal.App.2d 125, 128, 55 Cal.Rptr. 626.) Intel should not be helpless in the face of
repeated and threatened abuse and contamination of its private computer system.
The undisputed facts, in my view, rendered Hamidi's conduct legally actionable.
Thus, the trial court's decision to grant a permanent injunction was not "a clear
abuse of discretion" that may be "disturbed on appeal." (Shapiro v. San Diego City
Council (2002) 96 Cal.App.4th 904, 912, 117 Cal.Rptr.2d 631; see also City of
Vernon v. Central Basin Mun. Water Dist. (1999) 69 Cal.App.4th 508, 516, 81
Cal.Rptr.2d 650 [in an appeal of summary judgment, the trial court's decision to
67
deny a permanent injunction was "governed by the abuse of discretion standard of
review"].)
The injunction issued by the trial court simply required Hamidi to refrain from
further trespassory conduct, drawing no distinction based on the content of his emails. Hamidi remains free to communicate with Intel employees and others
outside the walls--both physical and electronic--of the company.
For these reasons, I respectfully dissent.
Notes and Questions
Rex owns “Web Women,” a web site consisting of a collection of hyperlinks to web
pages displaying pictures of women.3Maureen A. O’Rourke, Fencing Cyberspace:
Drawing Borders in a Virtual World, 82 Minn. L. Rev., 609, 6403 (1998). Web
Women links to online resumes containing pictures of women; to personal web sites
displaying pictures of women on vacation; to the female faculty biographical pages
of university web sites, and so on. Rex never copies pictures to his site; he only
links. He rates the sites to which he links in terms of attractiveness on a 1 to 10
scale. He collects the links using automated robot search software which he sends
to publicly accessible web sites. Vicki and Sally both maintain personal web sites
on which they display vacation pictures; each does so to give family and friends
easy access to the pictures, and each also thinks that members of the general
public trying to choose a vacation spot might find the pictures helpful. In order to
allow public access, neither Sally nor Vicki password protects their sites. Rex links
to both sites. Vicki is deeply offended; Sally is not, but she does feel exploited. If
Rex wants to link to her pictures, Sally wants a licensing fee. It is worth noting
that–like Sally–eBay is also concerned with licensing. eBay is quite willing to
license other sites to access and search its site and once had granted granted
Bidders’ Edge just such a license.4 eBay sued Bidders’ Edge only after negotiations
3
The example is adapted from the “Babes on the Web” controversy:
Babes on the Web was a web site consisting of links to the home pages of certain women
whose sites included their photographs. The links were accompanied by a desirability
rating. When a number of women objected to their inclusion on the Babes on the Web
site, the site’s operator eventually removed the links to the objecting sites.
4
eBay’s agreements govern, among other things, “the way in which its licensees can ‘deep link’ to the
eBay site; the default display of eBay content on the licensee’s site; the protect and use of eBay’s
intellectual property and advertisement content; [and] basic compensation provisions.” eBay v.
Bidder’s Edge, Inc., No. C-99-21200 RMW ENE, Brief of Amici Curiae, Reed Elsevier, Inc., The
National Association of Realtors and The e-commerce Coalition, Supporting the Affirmance of
the Order and Opinion of the District Court 13 (9th Cir. filed July 12, 2000). “In early 1998,
eBay gave BE permission to include information regarding eBay-hosted auctions for Beanie Babies and
Furbies in the BE database. . . . The parties contemplated . . . . they would reach a formal licensing
68
to renew the license agreement broke down.
Vicki and Sally live in a small town where they are among the many who
keep albums of their vacation pictures on their front porches so that people may
browse through them whenever they like. Rex visits the porches regularly and
summarizes his findings on his web site (now called, “Porch Pretties”). The site
contains the addresses of the properties where he has found albums to his liking (or
disliking), and he displays his 1 - 10 rating next to the address. In this variation,
trespass to land and trespass to chattels protect Vicki’s freedom and promote a
market exchange between Rex and Sally. Vicki can control access to her pictures
by banning Rex from her porch (via trespass to land5); or, if she wants to allow him
on the porch, she can prohibit him from opening the album (via trespass to
chattels6). Sally can do likewise to ensure that Rex can only look at her pictures if
he pays a fee.
Should they be able to do the same in the Internet variation? With regard to
freedom and efficiency, the two situations are the same. The Right plays the same
role on the Internet that its brick-and-mortar counterparts play in their context; it
allows Vicki to control who sees her pictures and turns Sally’s pictures–and the
information on eBay–into items for which Sally and eBay can effectively demand a
fee. It would be difficult to achieve these results without the Right. If we do not
invoke the Right, how are we going to determine the extent to which web site
owners have control over their property? Are we going to invent a new approach?
It is extraordinarily difficult to regulate appropriately when confronted, as we are on
the Internet, with rapid and revolutionary technological, cultural, and economic
change.7Ira Magaziner, At the Crossroads of Law and Technology, 33 Loy. L. A. L.
agreement [allowing a broader range of searches]. They were unable to do so.” eBay supra note 16, at
1062.
5
Intentionally entering land in possession of another without authorization is a trespass. Restatement
(Second) of Torts § 158 (1964).
6
Opening the album after being told not to would be an intentional, unauthorized use that impaired
value–provided the use was repeated and unpreventable. See supra notes 27 and 31 - 32 and
accompanying text.
7
Ira Magaziner emphasizes this point when commenting on the Clinton administration’s approach to the
Internet, he remarks that
one very important principle underlying our Internet policy was to favor private action
over governmental action. . . . it seemed to us most prudent to first let private sector
leadership try to develop the rules of the road for the Internet through private collective
action.” Magaziner’s main reason for this policy is that “the Internet moves too quickly.
The processes of government are too slow, inflexible, and bureaucratic to effectively
address Internet changes. And we were afraid that the development of the Internet would
be strangled by excessive government regulation and intrusion.”
69
Rev. 1165, 1173 (2000).
The sensible course is to start with models which are
relatively well-understood and whose consequences are predictable with some
accuracy; we can then adapt those models to the new situations we confront.
THE BRITISH HORSERACING BOARD LTD v. WILLIAM HILL
ORGANIZATION LTD. (ECJ 2004)
JUDGMENT:
1. This reference for a preliminary ruling concerns the interpretation of Article 7
and Article 10(3) of Directive 96/9/EC of the European Parliament and of the
Council of 11 March 1996 on the legal protection of databases (OJ 1996 L 77, p. 20,
>the directive=).
2. The reference was made in the course of proceedings brought by The British
Horseracing Board Ltd, the Jockey Club and Weatherbys Group Ltd (>the BHB and
Others=) against William Hill Organization Ltd (>William Hill=). The litigation arose
over the use by William Hill, for the purpose of organising betting on horse racing,
of information taken from the BHB database.
Legal background
3. The directive, according to Article 1(1) thereof, concerns the legal protection of
databases in any form. A database is defined, in Article 1(2) of the directive, as >a
collection of independent works, data or other materials arranged in a systematic or
methodical way and individually accessible by electronic or other means=.
4. Article 3 of the directive provides for copyright protection for databases which,
>by reason of the selection or arrangement of their contents, constitute the
author=s own intellectual creation=.
5. Article 7 of the directive provides for a sui generis right in the following terms:
Object of protection
1. Member States shall provide for a right for the maker of a database
which shows that there has been qualitatively and/or quantitatively a
substantial investment in either the obtaining, verification or
presentation of the contents to prevent extraction and/or re-utilisation
of the whole or of a substantial part, evaluated qualitatively and/or
quantitatively, of the contents of that database.
2. For the purposes of this Chapter:
(a) Aextraction@ shall mean the permanent or temporary transfer of
all or a substantial part of the contents of a database to another
medium by any means or in any form;
(b) Are-utilisation@ shall mean any form of making available to the
public all or a substantial part of the contents of a database by the
distribution of copies, by renting, by on-line or other forms of
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transmission. The first sale of a copy of a database within the
Community by the rightholder or with his consent shall exhaust the
right to control resale of that copy within the Community;
public lending is not an act of extraction or re-utilisation.
3. The right referred to in paragraph 1 may be transferred, assigned or
granted under contractual licence.
4. The right provided for in paragraph 1 shall apply irrespective of the
eligibility of that database for protection by copyright or by other
rights. Moreover, it shall apply irrespective of eligibility of the contents
of that database for protection by copyright or by other rights.
Protection of databases under the right provided for in paragraph 1
shall be without prejudice to rights existing in respect of their content.
5. The repeated and systematic extraction and/or re-utilisation of
insubstantial parts of the contents of the database implying acts which
conflict with a normal exploitation of that database or which
unreasonably prejudice the legitimate interests of the maker of the
database shall not be permitted.
6. Article 8(1) of the directive provides:
>The maker of a database which is made available to the public in
whatever manner may not prevent a lawful user of the database from
extracting and/or re-utilising insubstantial parts of its contents,
evaluated qualitatively and/or quantitatively, for any purposes
whatsoever. Where the lawful user is authorised to extract and/or reutilise only part of the database, this paragraph shall apply only to that
part.=
7. Under Article 9 of the directive >Member States may stipulate that lawful users
of a database which is made available to the public in whatever manner may,
without the authorisation of its maker, extract or re-utilise a substantial part of its
contents:
(a) in the case of extraction for private purposes of the contents of a
non-electronic database;
(b) in the case of extraction for the purposes of illustration for teaching
or scientific research, as long as the source is indicated and to the
extent justified by the non-commercial purpose to be achieved;
(c) in the case of extraction and/or re-utilisation for the purposes of
public security or an administrative or judicial procedure.=
8. Article 10 of the directive provides:
1. The right provided for in Article 7 shall run from the date of
completion of the making of the database. It shall expire 15 years
from the first of January of the year following the date of completion.
Y
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3. Any substantial change, evaluated qualitatively or quantitatively, to
the contents of a database, including any substantial change resulting
from the accumulation of successive additions, deletions or alterations,
which would result in the database being considered to be a
substantial new investment, evaluated qualitatively or quantitatively,
shall qualify the database resulting from that investment for its own
term of protection.
9. The directive was implemented in United Kingdom law by the Copyright and
Rights in Databases Regulations 1997 which entered into force on 1 January 1998.
The terms of those regulations are identical to those of the directive.
The main proceedings and the questions referred for a preliminary ruling
10. The BHB and Others manage the horse racing industry in the United Kingdom
and in various capacities compile and maintain the BHB database which contains a
large amount of information supplied by horse owners, trainers, horse race
organisers and others involved in the racing industry. The database contains
information on inter alia the pedigrees of some one million horses, and >pre-race
information= on races to be held in the United Kingdom. That information includes
the name, place and date of the race concerned, the distance over which the race is
to be run, the criteria for eligibility to enter the race, the date by which entries
must be received, the entry fee payable and the amount of money the racecourse is
to contribute to the prize money for the race.
11. Weatherbys Group Ltd, the company which compiles and maintains the BHB
database, performs three principal functions, which lead up to the issue of pre-race
information.
12. First, it registers information concerning owners, trainers, jockeys and horses
and records the performances of those horses in each race.
13. Second, it decides on weight adding and handicapping for the horses entered
for the various races.
14. Third, it compiles the lists of horses running in the races. This activity is carried
out by its own call centre, manned by about 30 operators. They record telephone
calls entering horses in each race organised. The identity and status of the person
entering the horse and whether the characteristics of the horse meet the criteria for
entry to the race are then checked. Following those checks the entries are
published provisionally. To take part in the race, the trainer must confirm the
horse=s participation by telephone by declaring it the day before the race at the
latest. The operators must then ascertain whether the horse can be authorised to
run the race in the light of the number of declarations already recorded. A central
computer then allocates a saddle cloth number to each horse and determines the
stall from which it will start. The final list of runners is published the day before the
race.
15. The BHB database contains essential information not only for those directly
involved in horse racing but also for radio and television broadcasters and for
bookmakers and their clients. The cost of running the BHB database is
approximately ,4 million per annum. The fees charged to third parties for the use
of the information in the database cover about a quarter of that amount.
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16. The database is accessible on the internet site operated jointly by BHB and
Weatherbys Group Ltd. Some of its contents are also published each week in the
BHB=s official journal. The contents of the database, or of certain parts of it, are
also made available to Racing Pages Ltd, a company jointly controlled by
Weatherbys Group Ltd and the Press Association, which then forwards data to its
various subscribers, including some bookmakers, in the form of a >Declarations
Feed=, the day before a race. Satellite Information Services Limited (>SIS=) is
authorised by Racing Pages to transmit data to its own subscribers in the form of a
>raw data feed= (>RDF=). The RDF includes a large amount of information, in
particular, the names of the horses running in the races, the names of the jockeys,
the saddle cloth numbers and the weight for each horse. Through the newspapers
and the Ceefax and Teletext services, the names of the runners in a particular race
are made available to the public during the course of the afternoon before the race.
17. William Hill, which is a subscriber to both the Declarations Feed and the RDF, is
one of the leading providers of off-course bookmaking services in the United
Kingdom, to both UK and international customers. It launched an on-line betting
service on two internet sites. Those interested can use these sites to find out what
horses are running in which races at which racecourses and what odds are offered
by William Hill.
18. The information displayed on William Hill=s internet sites is obtained, first,
from newspapers published the day before the race and, second, from the RDF
supplied by SIS on the morning of the race.
19. According to the order for reference, the information displayed on William Hill=s
internet sites represents a very small proportion of the total amount of data on the
BHB database, given that it concerns only the following matters: the names of all
the horses in the race, the date, time and/or name of the race and the name of the
racecourse where the race will be held. Also according to the order for reference,
the horse races and the lists of runners are not arranged on William Hill=s internet
sites in the same way as in the BHB database.
20. In March 2000 the BHB and Others brought proceedings against William Hill in
the High Court of Justice of England and Wales, Chancery Division, alleging
infringement of their sui generis right. They contend, first, that each day=s use by
William Hill of racing data taken from the newspapers or the RDF is an extraction or
re-utilisation of a substantial part of the contents of the BHB database, contrary to
Article 7(1) of the directive. Secondly, they say that even if the individual extracts
made by William Hill are not substantial they should be prohibited under Article
7(5) of the directive.
21. The High Court of Justice ruled in a judgment of 9 February 2001 that the
action of BHB and Others was well founded. William Hill appealed to the referring
court.
22. In the light of the problems of interpretation of the directive, the Court of
Appeal decided to stay proceedings and refer the following questions to the Court of
Justice for a preliminary ruling:
(1) May either of the expressions:
B Asubstantial part of the contents of the database@; or
B Ainsubstantial parts of the contents of the database@
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in Article 7 of the directive include works, data or other materials
derived from the database but which do not have the same systematic
or methodical arrangement of and individual accessibility as those to
be found in the database?
(2) What is meant by Aobtaining@ in Article 7(1) of the directive? In
particular, are the [facts and matters described above in paragraph
14] capable of amounting to such obtaining?
(3) Is Averification@ in Article 7(1) of the directive limited to ensuring
from time to time that information contained in a database is or
remains correct?
(4) What is meant in Article 7(1) of the directive, by the expressions:
B Aa substantial part, evaluated qualitatively ... of the contents of that
database@? and
B Aa substantial part, evaluated quantitatively ... of the contents of that
database@?
(5) What is meant in Article 7(5) of the directive, by the expression
Ainsubstantial parts of the database@?
(6) In particular, in each case:
B does Asubstantial@ mean something more than Ainsignificant@ and, if so,
what?
B does Ainsubstantial@ part simply mean that it is not Asubstantial@?
(7) Is Aextraction@ in Article 7 of the directive limited to the transfer of
the contents of the database directly from the database to another
medium, or does it also include the transfer of works, data or other
materials, which are derived indirectly from the database, without
having direct access to the database?
(8) Is Are-utilisation@ in Article 7 of the directive limited to the making
available to the public of the contents of the database directly from the
database, or does it also include the making available to the public of
works, data or other materials which are derived indirectly from the
database, without having direct access to the database?
(9) Is Are-utilisation@ in Article 7 of the directive limited to the first
making available to the public of the contents of the database?
(10) In Article 7(5) of the directive what is meant by Aacts which
conflict with a normal exploitation of that database or unreasonably
prejudice the legitimate interests of the maker of the database@? In
particular, are the facts and matters in paragraphs [17 to 19] above in
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the context of the facts and matters in paragraph [15] above capable
of amounting to such acts?
(11) Does Article 10(3) of the directive mean that, whenever there is a
Asubstantial change@ to the contents of a database, qualifying the
resulting database for its own term of protection, the resulting
database must be considered to be a new, separate database,
including for the purposes of Article 7(5)?=
The questions referred
Preliminary observations
23. Article 7(1) of the directive provides for specific protection, called a sui generis
right, for the maker of a database within the meaning of Article 1(2) of the
directive, provided that it >shows that there has been qualitatively and/or
quantitatively a substantial investment in either the obtaining, verification or
presentation of the contents=.
24. By its second and third questions, which should be considered together, the
referring court seeks an interpretation of the concept of investment in the obtaining
and verification of the contents of a database within the meaning of Article 7(1) of
the directive.
25. Article 7(1) of the directive authorises a maker of a database protected by a sui
generis right to prevent extraction and/or re-utilisation of the whole or of a
substantial part of its contents. Article 7(5) also prohibits the repeated and
systematic extraction and/or re-utilisation of insubstantial parts of the contents of
the database implying acts which conflict with a normal exploitation of that
database or which unreasonably prejudice the legitimate interests of the maker of
the database.
26. The seventh, eighth and ninth questions referred, which should be considered
together, concern the concepts of extraction and re-utilisation. The concepts of
>substantial part= and >insubstantial part= of the contents of a database are crucial
to the first, fourth, fifth and sixth questions, which will also be considered together.
27. The 10th question concerns the scope of the prohibition laid down by Article
7(5) of the directive. The 11th question seeks to ascertain whether a substantial
change by the maker of the database to its contents implies the existence of a new
database for the purposes of assessing, under Article 7(5) of the directive, whether
acts of extraction and/or re-utilisation of insubstantial parts of the contents of the
database were repeated and systematic.
The second and third questions, concerning the concept of investment in the
obtaining or verification of the contents of a database within the meaning of Article
7(1) of the directive
...
29. Article 7(1) of the directive reserves the protection of the sui generis right to
databases which meet a specific criterion, namely to those which show that there
has been qualitatively and/or quantitatively a substantial investment in the
obtaining, verification or presentation of their contents.
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30. Under the 9th, 10th and 12th recitals of the preamble to the directive, its
purpose, as William Hill points out, is to promote and protect investment in data
>storage= and >processing= systems which contribute to the development of an
information market against a background of exponential growth in the amount of
information generated and processed annually in all sectors of activity. It follows
that the expression >investment in Y the obtaining, verification or presentation of
the contents= of a database must be understood, generally, to refer to investment
in the creation of that database as such.
31. Against that background, the expression >investment in Y the obtaining Y of
the contents= of a database must, as William Hill and the Belgian, German and
Portuguese Governments point out, be understood to refer to the resources used to
seek out existing independent materials and collect them in the database, and not
to the resources used for the creation as such of independent materials. The
purpose of the protection by the sui generis right provided for by the directive is to
promote the establishment of storage and processing systems for existing
information and not the creation of materials capable of being collected
subsequently in a database.
32. That interpretation is backed up by the 39th recital of the preamble to the
directive, according to which the aim of the sui generis right is to safeguard the
results of the financial and professional investment made in >obtaining and
collection of the contents= of a database. As the Advocate General notes in points
41 to 46 of her Opinion, despite slight variations in wording, all the language
versions of the 39th recital support an interpretation which excludes the creation of
the materials contained in a database from the definition of obtaining.
33. The 19th recital of the preamble to the directive, according to which the
compilation of several recordings of musical performances on a CD does not
represent a substantial enough investment to be eligible under the sui generis right,
provides an additional argument in support of that interpretation. Indeed, it
appears from that recital that the resources used for the creation as such of works
or materials included in the database, in this case on a CD, cannot be deemed
equivalent to investment in the obtaining of the contents of that database and
cannot, therefore, be taken into account in assessing whether the investment in the
creation of the database was substantial.
34. The expression >investment in Y the Y verification Y of the contents= of a
database must be understood to refer to the resources used, with a view to
ensuring the reliability of the information contained in that database, to monitor the
accuracy of the materials collected when the database was created and during its
operation. The resources used for verification during the stage of creation of data or
other materials which are subsequently collected in a database, on the other hand,
are resources used in creating a database and cannot therefore be taken into
account in order to assess whether there was substantial investment in the terms of
Article 7(1) of the directive.
35. In that light, the fact that the creation of a database is linked to the exercise of
a principal activity in which the person creating the database is also the creator of
the materials contained in the database does not, as such, preclude that person
from claiming the protection of the sui generis right, provided that he establishes
that the obtaining of those materials, their verification or their presentation, in the
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sense described in paragraphs 31 to 34 of this judgment, required substantial
investment in quantitative or qualitative terms, which was independent of the
resources used to create those materials.
36. Thus, although the search for data and the verification of their accuracy at the
time a database is created do not require the maker of that database to use
particular resources because the data are those he created and are available to
him, the fact remains that the collection of those data, their systematic or
methodical arrangement in the database, the organisation of their individual
accessibility and the verification of their accuracy throughout the operation of the
database may require substantial investment in quantitative and/or qualitative
terms within the meaning of Article 7(1) of the directive.
37. In the case in the main proceedings, the referring court seeks to know whether
the investments described in paragraph 14 of this judgment can be considered to
amount to investment in obtaining the contents of the BHB database. The plaintiffs
in the main proceedings stress, in that connection, the substantial nature of the
above investment.
38. However, investment in the selection, for the purpose of organising horse
racing, of the horses admitted to run in the race concerned relates to the creation
of the data which make up the lists for those races which appear in the BHB
database. It does not constitute investment in obtaining the contents of the
database. It cannot, therefore, be taken into account in assessing whether the
investment in the creation of the database was substantial.
39. Admittedly, the process of entering a horse on a list for a race requires a
number of prior checks as to the identity of the person making the entry, the
characteristics of the horse and the classification of the horse, its owner and the
jockey.
40. However, such prior checks are made at the stage of creating the list for the
race in question. They thus constitute investment in the creation of data and not in
the verification of the contents of the database.
41. It follows that the resources used to draw up a list of horses in a race and to
carry out checks in that connection do not represent investment in the obtaining
and verification of the contents of the database in which that list appears.
42.In the light of the foregoing, the second and third questions referred should be
answered as follows:
B The expression >investment in Y the obtaining Y of the contents= of a
database in Article 7(1) of the directive must be understood to refer to the
resources used to seek out existing independent materials and collect them in the
database. It does not cover the resources used for the creation of materials which
make up the contents of a database.
B The expression >investment in Y the Y verification Y of the contents= of a
database in Article 7(1) of the directive must be understood to refer to the
resources used, with a view to ensuring the reliability of the information contained
in that database, to monitor the accuracy of the materials collected when the
database was created and during its operation. The resources used for verification
during the stage of creation of materials which are subsequently collected in a
database do not fall within that definition.
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B The resources used to draw up a list of horses in a race and to carry out
checks in that connection do not constitute investment in the obtaining and
verification of the contents of the database in which that list appears.
The seventh, eighth and ninth questions, on the terms >extraction= and >reutilisation= in Article 7 of the directive
43. By its seventh, eighth and ninth questions, the referring court seeks essentially
to know whether use such as that made by William Hill of a database constitutes
extraction and/or re-utilisation within the meaning of Article 7 of the directive. The
referring court asks, inter alia, whether the protection conferred by the sui generis
right also covers the use of data which, although derived originally from a protected
database, were obtained by the user from sources other than that database.
44. The protection of the sui generis right provided for by Article 7(1) of the
directive gives the maker of a database the option of preventing the unauthorised
extraction and/or re-utilisation of all or a substantial part of the contents of that
database, according to the 41st recital of the preamble to the directive.
Furthermore, Article 7(5) of the directive prohibits, under certain conditions, the
unauthorised extraction and/or re-utilisation of insubstantial parts of the contents
of a database.
45. The terms extraction and re-utilisation must be interpreted in the light of the
objective pursued by the sui generis right. It is intended to protect the maker of the
database against >acts by the user which go beyond [the] legitimate rights and
thereby harm the investment= of the maker, as indicated in the 42nd recital of the
preamble to the directive.
46. According to the 48th recital of the preamble to the directive, the sui generis
right has an economic justification, which is to afford protection to the maker of the
database and guarantee a return on his investment in the creation and
maintenance of the database.
47. Accordingly, it is not relevant, in an assessment of the scope of the protection
of the sui generis right, that the act of extraction and/or re-utilisation is for the
purpose of creating another database, whether in competition with the original
database or not, and whether the same or a different size from the original, nor is it
relevant that the act is part of an activity other than the creation of a database. The
42nd recital of the preamble to the directive confirms, in that connection, that >the
right to prohibit extraction and/or re-utilisation of all or a substantial part of the
contents relates not only to the manufacture of a parasitical competing product but
also to any user who, through his acts, causes significant detriment, evaluated
qualitatively or quantitatively, to the investment=.
48. It must also be pointed out that, although the Proposal for a Council Directive
on the legal protection of databases (OJ 1992 C 156, p. 4), presented by the
Commission on 15 April 1992, restricted the scope of the protection conferred by
the sui generis right, under Article 2(5), to unauthorised extraction or re-utilisation
>for commercial purposes=, the absence of any reference in Article 7 of the
directive to such purposes indicates that it is irrelevant, in an assessment of the
lawfulness of an act under the directive, whether the act is for a commercial or a
non-commercial purpose.
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49. In Article 7(2)(a) of the directive, extraction is defined as >the permanent or
temporary transfer of all or a substantial part of the contents of a database to
another medium by any means or in any form=, while in Article 7(2)(b), reutilisation is defined as >any form of making available to the public all or a
substantial part of the contents of a database by the distribution of copies, by
renting, by on-line or other forms of transmission=.
50. The reference to >a substantial part= in the definition of the concepts of
extraction and re-utilisation gives rise to confusion given that, according to Article
7(5) of the directive, extraction or re-utilisation may also concern an insubstantial
part of a database. As the Advocate General observes, in point 90 of her Opinion,
the reference, in Article 7(2) of the directive, to the substantial nature of the
extracted or re-utilised part does not concern the definition of those concepts as
such but must be understood to refer to one of the conditions for the application of
the sui generis right laid down by Article 7(1) of the directive.
51. The use of expressions such as >by any means or in any form= and >any form
of making available to the public= indicates that the Community legislature
intended to give the concepts of extraction and re-utilisation a wide definition. In
the light of the objective pursued by the directive, those terms must therefore be
interpreted as referring to any act of appropriating and making available to the
public, without the consent of the maker of the database, the results of his
investment, thus depriving him of revenue which should have enabled him to
redeem the cost of the investment.
52. Against that background, and contrary to the argument put forward by William
Hill and the Belgian and Portuguese Governments, the concepts of extraction and
re-utilisation cannot be exhaustively defined as instances of extraction and reutilisation directly from the original database at the risk of leaving the maker of the
database without protection from unauthorised copying from a copy of the
database. That interpretation is confirmed by Article 7(2)(b) of the directive,
according to which the first sale of a copy of a database within the Community by
the rightholder or with his consent is to exhaust the right to control >resale=, but
not the right to control extraction and re-utilisation of the contents, of that copy
within the Community.
53. Since acts of unauthorised extraction and/or re-utilisation by a third party from
a source other than the database concerned are liable, just as much as such acts
carried out directly from that database are, to prejudice the investment of the
maker of the database, it must be held that the concepts of extraction and reutilisation do not imply direct access to the database concerned.
54. However, it must be stressed that the protection of the sui generis right
concerns only acts of extraction and re-utilisation as defined in Article 7(2) of the
directive. That protection does not, on the other hand, cover consultation of a
database.
55. Of course, the maker of a database can reserve exclusive access to his
database to himself or reserve access to specific people. However, if he himself
makes the contents of his database or a part of it accessible to the public, his sui
generis right does not allow him to prevent third parties from consulting that base.
56. The same applies where the maker of the database authorises a third party to
re-utilise the contents of his database, in other words, to distribute it to the public.
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According to the definition of re-utilisation in Article 7(2)(b) of the directive, read in
conjunction with the 41st recital of the preamble thereto, the authorisation of the
maker for the re-utilisation of the database or a substantial part of it implies that he
consents to his database or the relevant part of it being made accessible to the
public by the third party to whom he gave that authorisation. In authorising reutilisation, the maker of the database thus creates an alternative means of access
to the contents of and of consultation of his database for those interested.
57. The fact that a database can be consulted by third parties through someone
who has authorisation for re-utilisation from the maker of the database does not,
however, prevent the maker from recovering the costs of his investment. It is
legitimate for the maker to charge a fee for the re-utilisation of the whole or a part
of his database which reflects, inter alia, the prospect of subsequent consultation
and thus guarantees him a sufficient return on his investment.
58. On the other hand, a lawful user of a database, in other words, a user whose
access to the contents of a database for the purpose of consultation results from
the direct or indirect consent of the maker of the database, may be prevented by
the maker, under the sui generis right provided for by Article 7(1) of the directive,
from then carrying out acts of extraction and/or re-utilisation of the whole or a
substantial part of the database. The consent of the maker of the database to
consultation does not entail exhaustion of the sui generis right.
59. That analysis is confirmed, as regards extraction, by the 44th recital of the
preamble to the directive, according to which, >when on-screen display of the
contents of a database necessitates the permanent or temporary transfer of all or a
substantial part of such contents to another medium, that act should be subject to
authorisation by the rightholder=. Similarly, as regards re-utilisation, the 43rd
recital of the preamble to the directive states that >in the case of on-line
transmission, the right to prohibit re-utilisation is not exhausted either as regards
the database or as regards a material copy of the database or of part thereof made
by the addressee of the transmission with the consent of the rightholder=.
60. It should, however, be emphasised that the prohibition in Article 7(1) of the
directive concerns only extraction and/or re-utilisation of the whole or of a
substantial part of a database whose creation required a substantial investment.
According to Article 8(1) of the directive, apart from in the cases referred to in
Article 7(5) of the directive, the sui generis right does not prevent a lawful user
from extracting and re-utilising insubstantial parts of the contents of a database.
61. It follows from the foregoing that acts of extraction, in other words, the transfer
of the contents of the database to another medium, and acts of re-utilisation, in
other words, the making available to the public of the contents of a database, which
affect the whole or a substantial part of the contents of a database require the
authorisation of the maker of the database, even where he has made his database,
as a whole or in part, accessible to the public or authorised a specific third party or
specific third parties to distribute it to the public.
62. The directive contains an exception to the principle set out in the previous
paragraph. Article 9 defines exhaustively three cases in which Member States may
stipulate that lawful users of a database which is made available to the public in
whatever manner may, without the authorisation of its maker, extract or re-utilise a
>substantial part= of the contents of that database. Those cases are: extraction for
private purposes of the contents of a non-electronic database, extraction for the
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purposes of illustration for teaching or scientific research and extraction and/or reutilisation for the purposes of public security or an administrative or judicial
procedure.
63. In the case in the main proceedings, the order for reference states that the
data concerning horse races which William Hill displays on its internet site and
which originate in the BHB database are obtained, first, from newspapers published
the day before the race and, second, from the RDF supplied by SIS.
64. According to the order for reference, the information published in the
newspapers is supplied to the press directly by Weatherbys Group Ltd, the company
which maintains the BHB database. As regards William Hill=s other source of
information, it must be borne in mind that SIS is authorised by Racing Pages Ltd,
which is partly controlled by Weatherbys Group Ltd, to supply information
concerning horse races in the form of RDF to its own members, which include
William Hill. The data in the BHB database concerning horse races have thus been
made accessible to the public for the purpose of consultation with the authorisation
of BHB.
65. Although William Hill is a lawful user of the database made accessible to the
public, at least as regards the part of that database representing information about
races, it appears from the order for reference that it carries out acts of extraction
and re-utilisation within the meaning of Article 7(2) of the directive. First, it
extracts data originating in the BHB database by transferring them from one
medium to another. It integrates those data into its own electronic system. Second,
it re-utilises those data by then making them available to the public on its internet
site in order to allow its clients to bet on horse races.
66. According to the order for reference, that extraction and re-utilisation was
carried out without the authorisation of BHB and Others. Since the present case
does not fall within any of the cases described in Article 9 of the directive, acts such
as those carried out by William Hill could be prevented by BHB and Others under
their sui generis right provided that they affect the whole or a substantial part of
the contents of the BHB database within the meaning of Article 7(1) of the
directive. If such acts affected insubstantial parts of the database they would be
prohibited only if the conditions in Article 7(5) of the directive were fulfilled.
67. In the light of the foregoing, the seventh, eighth and ninth questions should be
answered as follows:
B The terms >extraction= and >re-utilisation= in Article 7 of the directive
must be interpreted as referring to any unauthorised act of appropriation and
distribution to the public of the whole or a part of the contents of a database. Those
terms do not imply direct access to the database concerned.
B The fact that the contents of a database were made accessible to the public
by its maker or with his consent does not affect the right of the maker to prevent
acts of extraction and/or re-utilisation of the whole or a substantial part of the
contents of a database.
The first, fourth, fifth and sixth questions, concerning the terms >substantial part=
and >insubstantial part= of the contents of a database in Article 7 of the directive
68. By its fourth, fifth and sixth questions, the referring court raises the question
of the meaning of the terms >substantial part= and >insubstantial part= of the
81
contents of a database as used in Article 7 of the directive. By its first question it
also seeks to know whether materials derived from a database do not constitute a
part, substantial or otherwise, of that database, where their systematic or
methodical arrangement and the conditions of their individual accessibility have
been altered by the person carrying out the extraction and/or re-utilisation.
69. In that connection, it must be borne in mind that protection by the sui generis
right covers databases whose creation required a substantial investment. Against
that background, Article 7(1) of the directive prohibits extraction and/or reutilisation not only of the whole of a database protected by the sui generis right but
also of a substantial part, evaluated qualitatively or quantitatively, of its contents.
According to the 42nd recital of the preamble to the directive, that provision is
intended to prevent a situation in which a user >through his acts, causes significant
detriment, evaluated qualitatively or quantitatively, to the investment=. It appears
from that recital that the assessment, in qualitative terms, of whether the part at
issue is substantial, must, like the assessment in quantitative terms, refer to the
investment in the creation of the database and the prejudice caused to that
investment by the act of extracting or re-utilising that part.
70. The expression >substantial part, evaluated quantitatively=, of the contents of
a database within the meaning of Article 7(1) of the directive refers to the volume
of data extracted from the database and/or re-utilised, and must be assessed in
relation to the volume of the contents of the whole of that database. If a user
extracts and/or re-utilises a quantitatively significant part of the contents of a
database whose creation required the deployment of substantial resources, the
investment in the extracted or re-utilised part is, proportionately, equally
substantial.
71. The expression >substantial part, evaluated qualitatively=, of the contents of a
database refers to the scale of the investment in the obtaining, verification or
presentation of the contents of the subject of the act of extraction and/or reutilisation, regardless of whether that subject represents a quantitatively
substantial part of the general contents of the protected database. A quantitatively
negligible part of the contents of a database may in fact represent, in terms of
obtaining, verification or presentation, significant human, technical or financial
investment.
72. It must be added that, as the existence of the sui generis right does not,
according to the 46th recital of the preamble to the directive, give rise to the
creation of a new right in the works, data or materials themselves, the intrinsic
value of the materials affected by the act of extraction and/or re-utilisation does
not constitute a relevant criterion for the assessment of whether the part at issue is
substantial.
73. It must be held that any part which does not fulfil the definition of a substantial
part, evaluated both quantitatively and qualitatively, falls within the definition of an
insubstantial part of the contents of a database.
74. In that regard, it appears from the order for reference that the materials
displayed on William Hill=s internet sites, which derive from the BHB database,
represent only a very small proportion of the whole of that database, as stated in
paragraph 19 of this judgment. It must therefore be held that those materials do
not constitute a substantial part, evaluated quantitatively, of the contents of that
database.
82
75. According to the order for reference, the information published by William Hill
concerns only the following aspects of the BHB database: the names of all the
horses running in the race concerned, the date, the time and/or the name of the
race and the name of the racecourse, as also stated in paragraph 19 of this
judgment.
76. In order to assess whether those materials represent a substantial part,
evaluated qualitatively, of the contents of the BHB database, it must be considered
whether the human, technical and financial efforts put in by the maker of the
database in obtaining, verifying and presenting those data constitute a substantial
investment.
77. BHB and Others submit, in that connection, that the data extracted and reutilised by William Hill are of crucial importance because, without lists of runners,
the horse races could not take place. They add that those data represent a
significant investment, as demonstrated by the role played by a call centre
employing more than 30 operators.
78. However, it must be observed, first, that the intrinsic value of the data affected
by the act of extraction and/or re-utilisation does not constitute a relevant criterion
for assessing whether the part in question is substantial, evaluated qualitatively.
The fact that the data extracted and re-utilised by William Hill are vital to the
organisation of the horse races which BHB and Others are responsible for
organising is thus irrelevant to the assessment whether the acts of William Hill
concern a substantial part of the contents of the BHB database.
79. Next, it must be observed that the resources used for the creation as such of
the materials included in a database cannot be taken into account in assessing
whether the investment in the creation of that database was substantial, as stated
in paragraphs 31 to 33 of this judgment.
80. The resources deployed by BHB to establish, for the purposes of organising
horse races, the date, the time, the place and/or name of the race, and the horses
running in it, represent an investment in the creation of materials contained in the
BHB database. Consequently, and if, as the order for reference appears to indicate,
the materials extracted and re-utilised by William Hill did not require BHB and
Others to put in investment independent of the resources required for their
creation, it must be held that those materials do not represent a substantial part, in
qualitative terms, of the BHB database.
81. That being so, there is thus no need to reply to the first question referred. The
change made by the person making the extraction and re-utilisation to the
arrangement or the conditions of individual accessibility of the data affected by that
act cannot, in any event, have the effect of transforming a part of the contents of
the database at issue which is not substantial into a substantial part.
82. In the light of the foregoing, the fourth, fifth and sixth questions referred
should be answered as follows:
B The expression >substantial part, evaluated Y quantitatively, of the
contents of [a] database= in Article 7 of the directive refers to the volume of data
extracted from the database and/or re-utilised and must be assessed in relation to
the total volume of the contents of the database.
B The expression >substantial part, evaluated qualitatively Y of the contents
of [a] database= refers to the scale of the investment in the obtaining, verification
or presentation of the contents of the subject of the act of extraction and/or re-
83
utilisation, regardless of whether that subject represents a quantitatively
substantial part of the general contents of the protected database.
B Any part which does not fulfil the definition of a substantial part, evaluated
both quantitatively and qualitatively, falls within the definition of an insubstantial
part of the contents of a database.
The 10th question, concerning the scope of the prohibition laid down by Article 7(5)
of the directive
83. By its 10th question, the referring court seeks to know what type of act is
covered by the prohibition laid down by Article 7(5) of the directive. It also seeks to
know whether acts such as those carried out by William Hill are covered by that
prohibition.
84. On that point, it appears from Article 8(1) and from the 42nd recital of the
preamble to the directive that, as a rule, the maker of a database cannot prevent a
lawful user of that database from carrying out acts of extraction and re-utilisation of
an insubstantial part of its contents. Article 7(5) of the directive, which authorises
the maker of the database to prevent such acts under certain conditions, thus
provides for an exception to that general rule.
85. Common Position (EC) No 20/95 adopted by the Council on 10 July 1995 (OJ
1995 C 288, p. 14) states, under point 14 of the Council=s statement of reasons:
>to ensure that the lack of protection of the insubstantial parts does not lead to
their being repeatedly and systematically extracted and/or re-utilised, paragraph 5
of this article in the common position introduces a safeguard clause=.
86. It follows that the purpose of Article 7(5) of the directive is to prevent
circumvention of the prohibition in Article 7(1) of the directive. Its objective is to
prevent repeated and systematic extractions and/or re-utilisations of insubstantial
parts of the contents of a database, the cumulative effect of which would be to
seriously prejudice the investment made by the maker of the database just as the
extractions and/or re-utilisations referred to in Article 7(1) of the directive would.
87. The provision therefore prohibits acts of extraction made by users of the
database which, because of their repeated and systematic character, would lead to
the reconstitution of the database as a whole or, at the very least, of a substantial
part of it, without the authorisation of the maker of the database, whether those
acts were carried out with a view to the creation of another database or in the
exercise of an activity other than the creation of a database.
88. Similarly, Article 7(5) of the directive prohibits third parties from circumventing
the prohibition on re-utilisation laid down by Article 7(1) of the directive by making
insubstantial parts of the contents of the database available to the public in a
systematic and repeated manner.
89. Under those circumstances, >acts which conflict with a normal exploitation of
[a] database or which unreasonably prejudice the legitimate interests of the maker
of the database= refer to unauthorised actions for the purpose of reconstituting,
through the cumulative effect of acts of extraction, the whole or a substantial part
of the contents of a database protected by the sui generis right and/or of making
available to the public, through the cumulative effect of acts of re-utilisation, the
whole or a substantial part of the contents of such a database, which thus seriously
prejudice the investment made by the maker of the database.
84
90. In the case in the main proceedings, it is clear, in the light of the information
given in the order for reference, that the acts of extraction and re-utilisation carried
out by William Hill concern insubstantial parts of the BHB database, as stated in
paragraphs 74 to 80 of this judgment. According to the order for reference, they
are carried out on the occasion of each race held. They are thus of a repeated and
systematic nature.
91. However, such acts are not intended to circumvent the prohibition laid down in
Article 7(1) of the directive. There is no possibility that, through the cumulative
effect of its acts, William Hill might reconstitute and make available to the public
the whole or a substantial part of the contents of the BHB database and thereby
seriously prejudice the investment made by BHB in the creation of that database.
92. It must be pointed out in that connection that, according to the order for
reference, the materials derived from the BHB database which are published daily
on William Hill=s internet sites concern only the races for that day and are limited
to the information mentioned in paragraph 19 of this judgment.
93.As explained in paragraph 80 of this judgment, it appears from the order for
reference that the presence, in the database of the claimants, of the materials
affected by William Hill=s actions did not require investment by BHB and Others
independent of the resources used for their creation.
94. It must therefore be held that the prohibition in Article 7(5) of the directive
does not cover acts such as those of William Hill.
95. In the light of the foregoing, the answer to the 10th question must be that the
prohibition laid down by Article 7(5) of the directive refers to unauthorised acts of
extraction or re-utilisation the cumulative effect of which is to reconstitute and/or
make available to the public, without the authorisation of the maker of the
database, the whole or a substantial part of the contents of that database and
thereby seriously prejudice the investment by the maker.
96. Against that background, it is not necessary to reply to the 11th question
referred.
Facebook, Inc. v. Power Ventures, Inc., et al.
Case5:08-cv-05780-JW Document89
I. INTRODUCTION
Facebook, Inc. (“Plaintiff” or “Facebook”) brings this action against Power
Ventures, Inc. (“Defendant” or “Power”) alleging, inter alia, violations of the
California Comprehensive Computer Data Access and Fraud Act, Cal. Penal Code §
502 (“Section 502”). Facebook alleges that Power accessed the Facebook website in
violation of Facebook’s Terms of Use, and when Facebook tried to stop Power’s
unauthorized access, Power circumvented Facebook’s technical barriers. Power
brings counterclaims against Facebook alleging, inter alia, violations of the
Sherman Act, 15 U.S.C. § 2.
Presently before the Court are Facebook’s Motion for Judgment on the
Pleadings Pursuant to Fed. R. Civ. P. 12(c) or, in the Alternative, Partial Summary
Judgment of Liability Under California Penal Code § 502;1 Defendants’ Motion for
Summary Judgment;2 and Facebook’s Motion to Dismiss Counterclaims and Strike
85
Affirmative Defenses.3 The Court conducted a hearing on June 7, 2010. Based on
the papers submitted to date and oral argument, the Court DENIES Facebook’s
Motion for Judgment on the Pleadings, DENIES the parties’ Cross-Motions for
Summary Judgment, GRANTS Facebook’s Motion to Dismiss Defendants’
counterclaims for violations of Section 2 of the Sherman Act, GRANTS Facebook’s
Motion to Dismiss Defendants’ UCL counterclaim, and DENIES Facebook’s Motion to
Strike Defendants’ Affirmative Defenses.
...
IV. DISCUSSION
...
B. Defendants’ Section 502 Liability
Facebook contends that the undisputed facts prove that Defendants violated
Section 502. (Facebook’s Motion for Judgment on the Pleadings at 1.) Facebook
bases its Section 502 claim solely on facts that Defendants admit in their Amended
Answer, which Facebook contends show beyond dispute that Power accessed the
Facebook website in violation of the Facebook terms of use, and that when
Facebook tried to stop Power, Power worked around Facebook’s technical barriers.
(Id.) Defendants respond, inter alia, that there is no evidence that Power ever
accessed the Facebook website without the express permission of the user and
rightful owner of the accessed data.
On May 5, 2010, the Court granted the Electronic Frontier Foundation’s
(“EFF”) Motion to File Amicus Curiae in support of Defendants’ Motion. EFF
contends that in order to avoid constitutional vagueness concerns, the Court must
construe the statutory phrase “without permission” narrowly to exclude access to a
website or computer network that merely violates a term of use. Allowing criminal
liability based only on violation of contractual terms of service, EFF contends, would
grant the website or network administrator essentially unlimited authority to define
the scope of criminality and potentially expose millions of average internet users to
criminal sanctions without any meaningful notice. (Id.)
The Court finds that all of the subsections of Section 502(c) that potentially
apply in this case require that the defendant’s actions be taken “without
permission.” See Cal. Penal Code § 502(c)(2), (3), (7). However, the statute does
not expressly define the term “without permission.” In interpreting any statutory
language, the court looks first to the words of the statute. Lamie v. U.S. Trustee,
540 U.S. 526, 534 (2004). If the language is unambiguous, the statute should be
interpreted according to the plain meaning of the text. Id. at 534. The structure and
purpose of a statute can provide guidance in determining the plain meaning of its
provisions. K-Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988). Statutory
language is ambiguous if it is capable of being understood in two or more possible
senses or ways. Chickasaw Nation v. United States, 534 U.S. 84, 90 (2001). If a
statutory provision is ambiguous, the court turns to the legislative history for
guidance. SEC v. McCarthy, 322 F.3d 650, 655 (9th Cir. 2003). Here, the Court first
looks to the plain language of the statute. However, the term “without permission”
can be understood in multiple ways, especially with regard to whether access is
86
without permission simply as a result of violating the terms of use. Thus, the Court
must consider legislative intent and constitutional concerns to determine whether
the conduct at issue here falls within the scope of the statute. See F.C.C. v. Fox
Television Stations, Inc., 129 S. Ct. 1800, 1811 (2009) (noting that “the canon of
constitutional avoidance in an interpretive tool, counseling that ambiguous
statutory language be construed to avoid serious constitutional doubts”).
1. Plain Language of the Statute
Here, Facebook does not allege that Power has altered, deleted, damaged, or
destroyed any data, computer, computer system, or computer network, so the
subsections that require that type of action are not applicable. However, the Court
finds that the following subsections of Section 502 do not require destruction of
data, and thus may apply here:
(1)
(2)
(3)
Section 502(c)(2) holds liable any person who “[k]nowingly
accesses and without permission takes, copies, or makes use of
any data from a computer, computer system, or computer
network, or takes or copies any supporting documentation,
whether existing or residing internal or external to a computer,
computer system, or computer network;”
Section 502(c)(3) holds liable any person who “[k]nowingly and
without permission uses or causes to be used computer services;”
and
Section 502(c)(7) holds liable any person who “[k]nowingly and
without permission accesses or causes to be accessed any
computer, computer system, or computer network.”
To support its claim that Defendants violated these provisions, Facebook
relies solely on facts that Defendants admitted in their Amended Answer.
Specifically, Facebook points to Defendants’ admissions that: (1) “Power permits
users to enter their account information to access automated devices and programs
to access and obtain information from the Facebook website the Facebook site
through Power.com;” (2) “Defendants developed computer software and other
aggregating services;” (3) Facebook communicated to Vachani its claims that
“Power.com’s access of Facebook’s website and servers was unauthorized and
violated Facebook’s rights, including Facebook’s trademark, copyrights, and
business expectations with its users;” (4) “Facebook implemented technical
measures to block users from accessing Facebook through Power.com;”17 and (5)
“Power provided users with tools necessary to access Facebook through
Power.com.”18 Since all three of the subsections at issue here require that
Defendants’ acts with respect to the computer or computer network be taken
without permission, the Court analyzes that requirement first. Defendants and EFF
contend that Power’s actions could not have been without permission because
Power only accessed the Facebook website with the permission of a Facebook
account holder and at that account holder’s behest. (See Defendants’ Opposition re
Summary Judgment at 11; Amicus Brief at 11.) Facebook, on the other hand,
contends that regardless of whatever permission an individual Facebook user may
87
have given to Power to access a particular Facebook account, Power’s actions
clearly violated the website’s terms of use, which state that a Facebook user may
not “collect users’ content or information, or otherwise access Facebook, using
automated means (such as harvesting bots, robots, spiders, or scrapers) without
[Facebook’s] permission.” Since Power admits that it utilized “automated devices”
to gain access to the Facebook website, the Court finds that it is beyond dispute
that Power’s activities violated an express term of the Facebook terms of use.20
The issue then becomes whether an access or use that involves a violation of the
terms of use is “without permission” within the meaning of the statute. In the
modern context, in which millions of average internet users access websites every
day without ever reading, much less understanding, those websites’ terms of use,
this is far from an easy or straightforward question. Without clear guidance from
the statutory language itself, the Court turns to case law, legislative intent, and the
canon of constitutional avoidance to assist in interpreting the statute, and then
analyzes whether the acts at issue here were indeed taken without permission.
2. Caselaw
Since the California Supreme Court has not directly addressed the question
of whether the violation of a term of use constitutes access or use without
permission pursuant to Section 502, the Court looks to analogous state appellate
court cases and federal court cases from this district for guidance as to the statute’s
proper construction. The Court also considers cases interpreting the Computer
Fraud and Abuse Act (“CFAA”), the federal corollary to Section 502, in evaluating
how broad an application Section 502 should properly be given.
EFF relies on two state appellate cases for the proposition that Section 502
should not apply to persons who have permission to access a computer or computer
system, but who use that access in a manner that violates the rules applicable to
that system. Chrisman v. City of Los Angeles, 155 Cal. App. 4th 29, 32 (Cal. Ct.
App. 2007); Mahru v. Superior Court, 191 Cal. App. 3d 545, 549 (Cal. Ct. App.
1987). In Chrisman, the court found that a police officer did not violate Section 502
when, while on duty, the officer “accessed the Department computer system [] for
non-duty-related activities.” 155 Cal. App. 4th at 32. The court found that at
essence, Section 502 is an anti-hacking statute, and “[o]ne cannot reasonably
describe appellant’s improper computer inquiries about celebrities, friends, and
others as hacking.” Id. at 35. The officer’s “computer queries seeking information
that the department’s computer system was designed to provide to officers was
misconduct if he had no legitimate purpose for that information, but it was not
hacking the computer’s ‘logical, arithmetical, or memory function resources,’ as
[the officer] was entitled to access those resources.” Id. While Chrisman does not
address the specific issue before the Court here, and focuses on the statutory
definition of “access” rather than “without permission,” the Court finds that the case
helps to clarify that using a computer network for the purpose that it was designed
to serve, even if in a manner that is otherwise improper, is not the kind of behavior
that the legislature sought to prohibit when it enacted Section 502.
In Mahru, the court found that the director and part owner of a dataprocessing firm was not liable under Section 502 when he instructed the company’s
chief computer operator to make specified changes in the names of two files in a
88
former customer’s computer program in retaliation for that customer terminating its
contract with the company. 191 Cal. App. 3d at 547-48. These changes had the
effect of preventing the former customer’s employees from being able to run their
computer programs without the assistance of an expert computer software
technician. Id. In finding that Section 502 had not been violated by the company’s
actions, the court stated:
The Legislature could not have meant, by enacting section 502, to bring the
Penal Code into the computer age by making annoying or spiteful acts
criminal offenses whenever a computer is used to accomplish them.
Individuals and organizations use computers for typing and other routine
tasks in the conduct of their affairs, and sometimes in the course of these
affairs they do vexing, annoying, and injurious things. Such acts cannot all
be criminal. Id. at 549.
However, the court in Mahru based its finding of no liability in part on documentary
evidence establishing that the company, and not the former customer, owned the
computer hardware and software, which explains why the company’s manipulation
of files stored on that computer hardware was merely vexatious and not unlawful
hacking. The Court finds that Mahru is not applicable to the circumstances here,
where it is undisputed that Power accessed data stored on Facebook’s server.
In support of its contention that Facebook users cannot authorize Power to
access Facebook’s computer systems, Facebook relies on a previous order in this
case and another case from this District. On May 11, 2009, Judge Fogel issued an
order denying Defendants’ Motion to Dismiss Plaintiff’s copyright infringement,
DMCA, and trademark infringement claims. In addressing Plaintiff’s copyright
infringement claim, Judge Fogel found that, “[v]iewing the allegations in the FAC as
true, the utilization of Power.com by Facebook users exceeds their access rights
pursuant to the Terms of Use. Moreover, when a Facebook user directs Power.com
to access the Facebook website, an unauthorized copy of the user’s profile page is
created.” (May 11 Order at 6-7.) The Court finds that whether or not Facebook
users’ utilization of Power.com exceeds their access rights under Facebook’s terms
of use is not the issue presented in these Motions. Instead, the Court must
determine whether such a violation of the terms of use constitutes use “without
permission” within the meaning of Section 502, a question that the May 11 Order
did not directly address.
Finally, in Facebook, Inc. v. ConnectU LLC, Judge Seeborg found that a
competing social networking site violated Section 502 when it accessed the
Facebook website to collect “millions” of email addresses of Facebook users, and
then used those email addresses to solicit business for itself. 489 F. Supp. 2d 1087,
1089 (N.D. Cal. 2007). In that case, Judge Seeborg found unavailing ConnectU’s
contention that it did not act without permission because it only “accessed
information on the Facebook website that ordinarily would be accessible only to
registered users by using log-in information voluntarily supplied by registered
users.” Id. at 1090-91. Judge Seeborg found that ConnectU was subject to
Facebook’s terms of use and rejected ConnectU’s contention that “a private party
cannot define what is or what is not a criminal offense by unilateral imposition of
terms and conditions of use.” Id. at 1091. The court held that “[t]he fact that
private parties are free to set the conditions on which they will grant such
89
permission does not mean that private parties are defining what is criminal and
what is not.” Id.
The Court finds that of the cases discussed so far, the holding in ConnectU is
most applicable to the present case. However, the Court respectfully disagrees with
ConnectU in one key respect. Contrary to the holding of ConnectU, the Court finds
that allowing violations of terms of use to fall within the ambit of the statutory term
“without permission” does essentially place in private hands unbridled discretion to
determine the scope of criminal liability recognized under the statute. If the issue of
permission to access or use a website depends on adhering to unilaterally imposed
contractual terms, the website or computer system administrator has the power to
determine which actions may expose a user to criminal liability. This raises
constitutional concerns that will be addressed below.
Although cases interpreting the scope of liability under the CFAA do not
govern the Court’s analysis of the scope of liability under Section 502, CFAA cases
can be instructive. EFF points to several CFAA cases for the proposition that the
CFAA prohibits trespass and theft, not mere violations of terms of use. See, e.g.,
LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1130 (9th Cir. 2009) (“[F]or purposes
of the CFAA, when an employer authorizes an employee to use a company
computer subject to certain limitations, the employee remains authorized to use the
computer even if the employee violates those limitations.”); Diamond Power Int’l,
Inc. v. Davidson, 540 F. Supp. 2d 1322 (N.D. Ga. 2007) (“Under the more
reasoned view, a violation for accessing ‘without authorization’ occurs only where
initial access is not permitted.”); But see Shurgard Storage Ctrs., Inc. v. Safeguard
Self Storage, Inc., 119 F. Supp. 2d 1121, 1125-29 (W.D. Wash. 2000) (finding
employee may be held liable under CFAA for taking employer information from the
company’s computer system to his next job on the ground that he was “without
authorization” when he “allegedly sent [the employer’s] proprietary information to
the defendant”).
While there appears to be some disagreement in the district courts as to the
scope of the term “without authorization” in the CFAA context, the Court finds the
Ninth Circuit’s opinion in LVRC Holdings to be particularly useful in construing the
analogous term in Section 502. In that case, the Ninth Circuit found that access to
a computer may be “authorized,” within the statutory meaning of the term, even if
that access violates an agreed upon term of using that computer. In general, the
Court finds that the more recent CFAA cases militate for an interpretation of Section
502 that does not premise permission to access or use a computer or computer
network on a violation of terms of use. However, since none of the cases discussed
provides a definitive definition of without permission under Section 502, the Court
now looks to the legislative purpose of the statute to the extent that it can be
discerned. 15
3. Legislative Purpose
Section 502 includes the following statement of statutory purpose:
It is the intent of the Legislature in enacting this section to expand the
degree of protection afforded to individuals, businesses, and governmental
90
agencies from tampering, interference, damage, and unauthorized access to
lawfully created computer data and computer systems. The Legislature finds
and declares that the proliferation of computer technology has resulted in a
concomitant proliferation of computer crime and other forms of unauthorized
access to computers, computer systems, and computer data.
The Legislature further finds that protection of the integrity of all types and
forms of lawfully created computers, computer systems, and computer data
is vital to the protection of the privacy of individuals as well as to the wellbeing of financial institutions, business concerns, governmental agencies,
and others within this state that lawfully utilize those computers, computer
systems, and data.
Cal. Penal Code § 502(a).
Facebook contends that this language evidences legislative intent to address
conduct beyond “straightforward hacking and tampering.” (Facebook’s Reply re
Summary Judgment at 2.) Specifically, Facebook contends that the legislature’s
use of the phrases “protection . . . from . . . 13 unauthorized access” and
“protection of the integrity of all types and forms of computers, computer systems,
and computer data” demonstrates a far-reaching legislative purpose to protect the
entire 15 commercial computer infrastructure from trespass. (Id. at 2-3.)
The Court declines to give the statute’s statement of legislative intent the
sweeping meaning that Facebook ascribes to it. Section 502(a) speaks in general
terms of a “proliferation of computer crime and other forms of unauthorized access
to computers,” but does not offer any further guidance as to what specific acts
would constitute such crime or unauthorized access. It is far from clear what
conduct the legislature believed posed a threat to the integrity of computers and
computer systems, or if the legislature could even fathom the shape that those
threats would take more than twenty years after the statute was first enacted.
Thus, the Court does not assign any weight to the statute’s statement of
legislative intent in construing the liability provisions of Section 502.
4. Rule of Lenity
EFF contends that interpreting Section 502 broadly to allow liability where
the absence of permission is based only on the violation of a contractual term of
use or failure to fully comply with a cease and desist letter would render the statute
unconstitutionally vague, stripping the statute of adequate notice to citizens of what
conduct is criminally prohibited. (Amicus Brief at 24-28.) EFF further contends that
giving the statute the broad application that Facebook seeks could expose large
numbers of average internet users to criminal liability for engaging in routine websurfing and emailing activity. (Id.)
“It is a fundamental tenet of due process that ‘[n]o one may be required at
peril of life, liberty or property to speculate as to the meaning of penal statutes.”
Lanzetta v. New Jersey, 306 U.S. 451, 453 (1993). Thus, a criminal statute is
invalid if it “fails to give a person of ordinary intelligence fair notice that his
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contemplated conduct is forbidden.” United States v. Harriss, 347 U.S. 612 (1954).
Where a statute has both criminal and noncriminal applications, courts must
interpret the statute consistently in both contexts. Leocal v. Ashcroft, 543 U.S. 1,
11 n.8 (2004). In the Ninth Circuit, “[t]o survive vagueness review, a statute must
‘(1) define the offense with sufficient definiteness that ordinary people can
understand what conduct is prohibited; and (2) establish standards to permit police
to enforce the law in a non-arbitrary, non-discriminatory manner.’” United States v.
Sutcliffe, 505 F.3d 944, 953 (9th Cir. 2007).
The Court finds that interpreting the statutory phrase “without permission” in
a manner that imposes liability for a violation of a term of use or receipt of a cease
and desist letter would create a constitutionally untenable situation in which
criminal penalties could be meted out on the basis of violating vague or ambiguous
terms of use. In the words of one commentator, “By granting the computer owner
essentially unlimited authority to define authorization, the contract standard
delegates the scope of criminality to every computer owner.” Users of computer
and internet services cannot have adequate notice of what actions will or will not
expose them to criminal liability when a computer network or website administrator
can unilaterally change the rules at any time and are under no obligation to make
the terms of use specific or understandable to the general public. Thus, in order to
avoid rendering the statute constitutionally infirm, the Court finds that a user of
internet services does not access or use a computer, computer network, or website
without permission simply because that user violated a contractual term of use.22
If a violation of a term of use is by itself insufficient to support a finding that
the user’s access was “without permission” in violation of Section 502, the issue
becomes what type of action would be sufficient to support such a finding. The
Court finds that a distinction can be made between access that violates a term of
use and access that circumvents technical or code-based barriers that a computer
network or website administrator erects to restrict the user’s privileges within the
system, or to bar the user from the system altogether. Limiting criminal liability to
circumstances in which a user gains access to a computer, computer network, or
website to which access was restricted through technological means eliminates any
constitutional notice concerns, since a person applying the technical skill necessary
to overcome such a barrier will almost always understand that any access gained
through such action is unauthorized. Thus, the Court finds that accessing or using a
computer, computer network, or website in a manner that overcomes technical or
code-based barriers is “without permission,” and may subject a user to liability
under Section 502.
Applying this construction of the statute here, the Court finds that Power did
not act “without permission” within the meaning of Section 502 when Facebook
account holders utilized the Power website to access and manipulate their user
content on the Facebook website, even if such action violated Facebook’s Terms of
Use. However, to the extent that Facebook can prove that in doing so, Power
circumvented Facebook’s technical barriers, Power may be held liable for violation
of Section 502. Here, Facebook relies solely on the pleadings for its Motion. In their
Answer, Defendants do not directly admit that the tools Power provided to its users
were designed to circumvent the technical barriers that Facebook put in place to
block Power’s access to the Facebook website. Thus, the Court finds that there is a
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genuine issue of material fact as to whether Power’s access or use of the Facebook
website was “without permission” within the meaning of Section 502.
EFF contends that even if Power evaded the technical barriers that Facebook
implemented to deny it access, Power’s conduct does not fall within the scope of
Section 502 liability. (Amicus Brief at 19-28.) More specifically, EFF contends that it
would be inconsistent to allow liability for ignoring or bypassing technical barriers
whose sole purpose is to enforce contractual limits on access while denying liability
for violating those same contractual limits when technological means of restricting
access are not employed. (Id. at 19.) Thus, according to EFF, Power’s efforts to
circumvent Facebook’s IP-blocking efforts did not violate Section 502 because
Facebook was merely attempting to enforce its Terms of Use by other means.24
(Id. at 23-24.) The Court finds EFF’s contentions unpersuasive in this regard. EFF
has not pointed to any meaningful distinction between IP address blocking and any
other conceivable technical barrier that would adequately justify not finding Section
502 liability in one instance while finding it in the other. Moreover, the owners’
underlying purpose or motivation for implementing technical barriers, whether to
enforce terms of use or otherwise, is not a relevant consideration when determining
the appropriate scope of liability for accessing a computer or network without
authorization. There can be no ambiguity or mistake as to whether access has been
authorized when one encounters a technical block, and thus there is no potential
failure of notice to the computer user as to what conduct may be subject to criminal
liability, as when a violation of terms of use is the sole basis for liability.
Accordingly, the Court DENIES Facebook’s Motion for Judgment on the
Pleadings, and DENIES the parties’ Cross-Motions for Summary Judgment as to
Facebook’s Section 502 cause of action.
United States District Court,
S.D. New York.
In re DOUBLECLICK INC. PRIVACY LITIGATION,
154 F.Supp.2d 497
March 28, 2001.
OPINION AND ORDER
Buchwald, District Judge.
Plaintiffs bring this class action on behalf of themselves and all others
similarly situated8 against defendant DoubleClick, Inc. ("defendant" or
"DoubleClick") seeking injunctive and monetary relief for injuries they have suffered
as a result of DoubleClick's purported illegal conduct. Specifically, plaintiffs bring
8
The class is defined as "All persons who, since 1/1/96, have had information about them
gathered by DoubleClick as a result of viewing any DoubleClick products or services on the
Internet or who have had DoubleClick 'cookies,' as defined below, placed upon their computers."
Plaintiffs' May 26, 2000 Amended Complaint ("Amended Complaint") at ¶ 1.
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three claims under federal laws: (1) 18 U.S.C. § 2701, et seq.; (2) 18 U.S.C. §
2510, et seq.; (3) 18 U.S.C. § 1030, et seq.; and four claims under state laws:
(1) common law invasion of privacy; (2) common law unjust enrichment; (3)
common law trespass to property; and (4) Sections 349(a) and 350 of Article 22A
of the New York General Business Law.
Now pending is DoubleClick's motion, pursuant to Fed.R.Civ.P. 12(b)(6), to
dismiss Claims I, II and III of the Amended Complaint for failure to state a claim on
which relief can be granted. For the reasons discussed below, DoubleClick's
motion is granted and the Amended Complaint is dismissed with prejudice.
PROCEDURAL HISTORY
This case is a multidistrict consolidated class action. The initial complaint
was filed in this Court on January 31, 2000. On May 10, 2000, this Court
consolidated the set of related federal class actions against DoubleClick in the
Southern and Eastern Districts of New York pursuant to Rule 42(a) of the
Fed.R.Civ.P. and Local Rule 1.6 of the Southern and Eastern Districts of New York.
[FN2] The consolidated class filed its Amended Complaint on May 26, 2000. Later,
pursuant to 28 U.S.C. § 1407(a), the Judicial Panel on Multidistrict Litigation
transferred two cases to this Court for pretrial proceedings: Steinbeck v.
DoubleClick, 00 Civ. 5705, C.A, N.O. 8:00-98 (C.D.Cal) on July 31, 2000 and
Freedman v. DoubleClick, 00 Civ. 7194, 2:00- 1559 (E.D.La) on September 22,
2000.
FN2. Healy v. DoubleClick, 00 Civ. 0641(NRB); Donaldson v. DoubleClick, 00
Civ. 0696(RMB); Wong v. DoubleClick, 00 Civ. 1253(NRB); Mandel v.
DoubleClick, 00 Civ. 1290(RMB); Cohen v. DoubleClick, 00 Civ. 1349(JSM);
Katz v. DoubleClick, 00 Civ. 1552 (UN-RMB); Bruce v. DoubleClick, 00 Civ.
1572(JGK); Gibson v. DoubleClick, 00 Civ. v1596 (U- RMB); Lehner v.
DoubleClick, 00 Civ. 1813 (U-NRB); Gassman v. DoubleClick, 00 Civ. 1897
(U-NRB); Rand v. Doubleclick 00 Civ. 6398(NRB).
BACKGROUND
DoubleClick, a Delaware corporation, is the largest provider of Internet
advertising products and services in the world. Its Internet-based advertising
network of over 11,000 Web publishers has enabled DoubleClick to become the
market leader in delivering online advertising. DoubleClick specializes in collecting,
compiling and analyzing information about Internet users through proprietary
technologies and techniques, and using it to target online advertising. DoubleClick
has placed billions of advertisements on its clients' behalf and its services reach the
majority of Internet users in the United States.
THE INTERNET
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Although a comprehensive description of the Internet is unnecessary to
address the issues raised in this motion, a rudimentary grasp of its architecture and
engineering is important. [FN4] The Internet is accurately described as a "network
of networks." Computer networks are interconnected individual computers that
share information. Anytime two or more computer networks connect, they form an
"internet." The "Internet" is a shorthand name for the vast collection of
interconnected computer networks that evolved from the Advanced Research
Projects Agency Network ("ARPANet") developed by the United States Defense
Department in the 1960's and 1970's. Today, the Internet spans the globe and
connects hundreds of thousands of independent networks.
FN4. See generally Reno v. ACLU, 521 U.S. 844, 117 S.Ct. 2329, 138 L.Ed.2d
874 (1997) (description of the Internet).
The World Wide Web ("the Web" or "WWW") is often mistakenly referred to
as the Internet. However, the two are quite different. The Internet is the physical
infrastructure of the online world: the servers, computers, fiber- optic cables and
routers through which data is shared online. The Web is data: a vast collection of
documents containing text, visual images, audio clips and other information media
that is accessed through the Internet. Computers known as "servers" store these
documents and make them available over the Internet through "TCP/IP"
(Transmission Control Protocol/Internet Protocol), a set of standard operating and
transmission protocols that structure the Web's operation. Every document has a
unique "URL" (Universal Resource Locator) that identifies its physical location in the
Internet's infrastructure. Users access documents by sending request messages to
the servers that store the documents. When a server receives a user's request
(for example, for Lycos.com's home page), it prepares the document and then
transmits the information back to the user.
The Internet utilizes a technology called "packet switching" to carry data.
Packet switching works as follows. The computer wishing to send a document
("originating computer"), such as a music file or digital image, cuts the document
up into many small "packets" of information. Each packet contains the Internet
Protocol ("IP") address of the destination Web site, a small portion of data from the
original document, and an indication of the data's place in the original document.
The originating computer then sends all of the packets through its local network to
an external "router." A router is a device that contains continuously-updated
directories of Internet addresses called "routing tables." The router takes each
packet from the original document and sends it to the next available router in the
direction of the destination Web site. Because each router is connected to many
other routers and because the connection between any two given routers may be
congested with traffic at a given moment, packets from the same document are
often sent to different routers. Each of these routers, in turn, repeats this process,
forwarding each packet it receives to the next available router in the direction of
the destination Web site. Collectively, this process is called "dynamic routing."
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The result is that packets of information from the originating computer may
take entirely different routes over the Internet (i.e., traveling over different routers
and cables) to their ultimate destination. Obviously, the packets arrive out of their
original order because some have been forced to take much longer or slower routes
between the originating and destination computers. [FN5] However, because each
packet contains code that identifies its place in the original document, the
destination computer is able to reassemble the original document from the
disorganized packets. At that point, the destination computer sends a message
back to the originating computer either reporting that it received the full message,
or requesting that the originating computer re-send any packets that never arrived.
This entire process typically occurs in a matter of seconds. Packet-switching
technology and dynamic routing have helped to give the Internet's infrastructure its
extraordinary efficiency and resiliency.
FN5. For example, if a computer in New York sent a document to one in
Boston, some packets might travel through routers and cables directly up the
east coast while other packets might be sent by way of Seattle or Denver,
due to momentary congestion on the east coast routes.
DOUBLECLICK'S TECHNOLOGY AND SERVICES
DoubleClick provides the Internet's largest advertising service. Commercial
Web sites often rent-out online advertising "space" to other Web sites. In the
simplest type of arrangement, the host Web site (e.g., Lycos.com) rents space on
its webpages to another Web site (e.g., TheGlobe.com) to place a "hotlink" banner
advertisement [FN6] ("banner advertisement"). When a user on the host Web site
"clicks" on the banner advertisement, he is automatically connected to the
advertiser's designated Web site.
FN6. As plaintiffs explain, "Banner advertisements are so named because
they generally resemble flags or banners, in that they tend to be long and
narrow and their width often spans a significant part of a Web page."
Amended Complaint at ¶ 60.
DoubleClick acts as an intermediary between host Web sites and Web sites
seeking to place banner advertisements. It promises client Web sites that it will
place their banner advertisements in front of viewers who match their demographic
target. For example, DoubleClick might try to place banner advertisements for a
Web site that sells golfclubs in front of high-income people who follow golf and have
a track record of making expensive online purchases. DoubleClick creates value
for its customers in large part by building detailed profiles of Internet users [FN7]
and using them to target clients' advertisements.
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FN7. It is important to note that the term "user" actually refers to a
particular computer, not a particular person. DoubleClick collects
information based upon the computer's Web activity, regardless of whether
one person or one hundred people happen to use that computer. In the
same vein, if one person uses multiple computers, DoubleClick would be
unable to identify and aggregate the person's activity on different computers.
DoubleClick compiles user profiles utilizing its proprietary technologies and
analyses in cooperation with its affiliated Web sites. DoubleClick is affiliated with
over 11,000 Web sites for which and on which it provides targeted banner
advertisements. A select group of over 1,500 of these Web sites form the
"DoubleClick Network" and are among "the most highly trafficked and branded sites
on the Web." In addition, DoubleClick owns and operates two Web sites through
which it also collects user data: (1) the Internet Address Finder ("IAF"); and (2)
NetDeals.com. [FN8]
FN8. Plaintiffs allege that IAF is marketed as the most comprehensive e-mail
directory on the Internet. Netdeals.com is a "sweepstakes" and catalog Web
site. Both Web sites allegedly require users to submit personal information
in order to use the services.
When users visit any of these DoubleClick-affiliated Web sites, a "cookie" is
placed on their hard drives. [FN9] Cookies are computer programs commonly used
by Web sites to store useful information such as usernames, passwords, and
preferences, making it easier for users to access Web pages in an efficient manner.
However, Plaintiffs allege that DoubleClick's cookies collect "information that Web
users, including plaintiffs and the Class, consider to be personal and private, such
as names, e-mail addresses, home and business addresses, telephone numbers,
searches performed on the Internet, Web pages or sites visited on the Internet and
other communications and information that users would not ordinarily expect
advertisers to be able to collect." Amended Complaint at ¶ 38. DoubleClick's
cookies store this personal information on users' hard drives until DoubleClick
electronically accesses the cookies and uploads the data.
FN9. If a DoubleClick cookie already exists on the user's hard drive, another
is not placed.
How DoubleClick targets banner advertisements and utilizes cookies to collect
user information is crucial to our analysis under the three statutes. Therefore, we
examine both processes in greater detail.
A. Targeting Banner Advertisements
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DoubleClick's advertising targeting process involves three participants and
four steps. The three participants are: (1) the user; (2) the DoubleClickaffiliated Web site; (3) the DoubleClick server. [FN10] For the purposes of this
discussion, we assume that a DoubleClick cookie already sits on the user's
computer with the identification number "# 0001."
FN10. DoubleClick actually has a great number of servers, but for the
purpose of describing the process, it is easier to imagine just one.
In Step One, a user seeks to access a DoubleClick-affiliated Web site such as
Lycos.com. The user's browser [FN11] sends a communication to Lycos.com
(technically, to Lycos.com's server) saying, in essence, "Send me your homepage."
U.S. Patent No. 5,948,061 (issued September 7, 1999) ("DoubleClick Patent"), col.
3, ll. 6-9. This communication may contain data submitted as part of the request,
such as a query string or field information.
FN11. A browser is a computer program through which a user communicates
on the Web.
In Step Two, Lycos.com receives the request, processes it, and returns a
communication to the user saying "Here is the Web page you requested." The
communication has two parts. The first part is a copy of the Lycos.com homepage,
essentially the collection article summaries, pictures and hotlinks a user sees on his
screen when Lycos.com appears. The only objects missing are the banner
advertisements; in their places lie blank spaces. Id. at col. 3, ll. 28-34. The
second part of the communication is an IP-address link to the DoubleClick server.
Id. at col. 3, ll. 35-38. This link instructs the user's computer to send a
communication automatically to DoubleClick's server.
In Step Three, as per the IP-address instruction, the user's computer sends a
communication to the DoubleClick server saying "I am cookie # 0001, send me
banner advertisements to fill the blank spaces in the Lycos.com Web page." This
communication contains information including the cookie identification number, the
name of the DoubleClick-affiliated Web site the user requested, and the user's
browser-type. Id. at col. 3, ll. 41-52.
Finally, in Step Four, the DoubleClick server identifies the user's profile by
the cookie identification number and runs a complex set of algorithms based, in
part, on the user's profile, to determine which advertisements it will present to the
user. Id. at col. 3, ll. 52-57, col. 5, l. 11--col. 6, l. 59. It then sends a
communication to the user with banner advertisements saying "Here are the
targeted banner advertisements *504 for the Lycos.com homepage." Meanwhile,
it also updates the user's profile with the information from the request. Id. at col.
6, l. 60--col. 7, l. 14.
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DoubleClick's targeted advertising process is invisible to the user. His
experience consists simply of requesting the Lycos.com homepage and, several
moments later, receiving it complete with banner advertisements.
B. Cookie Information Collection
DoubleClick's cookies only collect information from one step of the above
process: Step One. The cookies capture certain parts of the communications that
users send to DoubleClick-affiliated Web sites. They collect this information in
three ways: (1) "GET" submissions, (2) "POST" submissions, and (3) "GIF"
submissions.
GET information is submitted as part of a Web site's address or "URL," in
what is known as a "query string." For example, a request for a hypothetical
online record store's selection of Bon Jovi albums might read: http://
recordstore.hypothetical. com/ search?terms=bonjovi. The URL query string begins
with the "?" character meaning the cookie would record that the user requested
information about Bon Jovi.
Users submit POST information when they fill-in multiple blank fields on a
webpage. For example, if a user signed-up for an online discussion group, he
might have to fill-in fields with his name, address, email address, phone number
and discussion group alias. The cookie would capture this submitted POST
information.
Finally, DoubleClick places GIF tags on its affiliated Web sites. GIF tags are
the size of a single pixel and are invisible to users. Unseen, they record the users'
movements throughout the affiliated Web site, enabling DoubleClick to learn what
information the user sought and viewed.
Although the information collected by DoubleClick's cookies is allegedly
voluminous and detailed, it is important to note three clearly defined parameters.
First, DoubleClick's cookies only collect information concerning users' activities on
DoubleClick-affiliated Web sites. [FN12] Thus, if a user visits an unaffiliated Web
site, the DoubleClick cookie captures no information. Second, plaintiff does not
allege that DoubleClick ever attempted to collect any information other than the
GET, POST, and GIF information submitted by users. DoubleClick is never alleged
to have accessed files, programs or other information on users' hard drives. Third,
DoubleClick will not collect information from any user who takes simple steps to
prevent DoubleClick's tracking. As plaintiffs' counsel demonstrated at oral
argument, users can easily and at no cost prevent DoubleClick from collecting
information from them. They may do this in two ways: (1) visiting the
DoubleClick Web site and requesting an "opt-out" cookie; and (2) configuring their
browsers to block any cookies from *505 being deposited. Transcript of February
22, 2001 Oral Argument at 15-18.
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FN12. See Amended Complaint at ¶ 6 ("Thus, through DoubleClick's
relationships with Web publishers and advertisers located throughout the
United States, defendant has secretly obtained personal and private
information from plaintiffs and the Class members."); ¶ 42 ("When a user
visits a Web site utilizing DoubleClick's advertising products and services
..."); ¶ 45 ("DoubleClick's technology wrongfully monitors Internet users'
activities at each and every Web site the users visit at which DoubleClick's
products or services are utilized."); ¶ 68 ("Once DoubleClick implants a
cookie onto a user's computer, DoubleClick is automatically able to access,
read and update that cookie on any of the other 11,000 or so Web sites
where it has a presence ..."); Transcript of February 22, 20001 Oral
Argument at 7-8 (admission by plaintiffs' counsel that information is only
collected from DoubleClick-affiliated Web sites).
Once DoubleClick collects information from the cookies on users' hard drives,
it aggregates and compiles the information to build demographic profiles of users.
Plaintiffs allege that DoubleClick has more than 100 million user profiles in its
database. Exploiting its proprietary Dynamic Advertising Reporting & Targeting
("DART") technology, DoubleClick and its licensees [FN13] target banner
advertisements using these demographic profiles.
FN13. DoubleClick allegedly licenses its DART technology to thousands of
Web sites who utilize it to target banner advertisements on their own.
ABACUS ACQUISITION AND FTC INVESTIGATION
In June 1999, DoubleClick purchased Abacus Direct Corp. ("Abacus") for
more than one billion dollars. Abacus was a direct-marketing services company
that maintained a database of names, addresses, telephone numbers, retail
purchasing habits and other personal information on approximately ninety percent
of American households, which it sold to direct marketing companies. Plaintiffs
allege that DoubleClick planned to combine its database of online profiles with
Abacus' database of offline customer profiles in order to create a super- database
capable of matching users' online activities with their names and addresses.
In furtherance of this effort, DoubleClick created the Abacus Online Alliance
("Abacus Alliance") and amended its privacy policy. The Abacus Alliance is
purportedly a confidential group of online marketers and publishers who secretly
contribute their compiled customer data to a cooperative database managed by
DoubleClick. In return for their contributions, Abacus Alliance members gain
access to exclusive DoubleClick products and services. In mid- 1999, shortly after
acquiring Abacus, DoubleClick amended its privacy policy by removing its assurance
that information gathered from users online would not be associated with their
personally identifiable information.
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Not long after the Abacus acquisition, the Federal Trade Commission ("FTC")
launched an investigation into whether DoubleClick's collection, compilation and use
of consumer information constituted unfair or deceptive trade practices in violation
of Section 5 of the Federal Trade Commission Act. [FN14] On March 2, 2000, Kevin
O'Connor, DoubleClick's CEO and Chairman of the Board, announced that he had
made a "mistake" by planning to merge DoubleClick's and Abacus' databases and
stated that DoubleClick would undertake no such merger until it reached an
agreement with the United States government and Internet industry regarding
privacy standards. It is unclear whether DoubleClick had already merged any of
the information. [FN15]
FN14. Specifically, "[t]he primary purposes of the inquiry were: 1) whether
[DoubleClick] used or disclosed consumers' PII [personal identifying
information] for purposes other than those disclosed in, or in contravention
of, its privacy policy, including in particular, whether it combined PII from
Abacus Direct (an offline direct marketing company that it had acquired) with
non-PII clickstream data that DoubleClick had collected; and 2) whether
[DoubleClick] used or disclosed sensitive information about consumers in
contravention of its stated privacy policy." Letter from Joel Winston, Acting
Associate Director, Division of Financial Practices, FTC, to Christine Varney,
Esq., Hogan & Hartson, Outside Counsel for DoubleClick, January 22, 2001
("FTC January 22, 2001 Letter.").
FN15. Plaintiffs allege that in February 2000 (prior to O'Connor's
announcement), DoubleClick President Kevin Ryan stated that DoubleClick
had already merged between 50,000 and 100,000 records from online and
offline databases. Amended Complaint at ¶ 82. However, the FTC, in its
January 22, 2001 letter ending its DoubleClick investigation, found
"[s]pecifically, it appears that DoubleClick did not combine PII from Abacus
Direct with clickstream collected on client Web sites." For the purposes of
this motion, we assume the truth of plaintiffs' pleadings.
The FTC concluded its investigation on January 22, 2001. In a letter to
DoubleClick's outside counsel, the FTC announced that it was ending its
investigation with no finding that DoubleClick had engaged in unfair or deceptive
trade practices. It summarized its conclusions:
Based on this investigation, it appears to staff that DoubleClick never used or
disclosed consumers' PII [personal identifiable information] for purposes other
than those disclosed in its privacy policy. Specifically, it appears that DoubleClick
did not combine PII from Abacus Direct with clickstream collected on client Web
sites. In addition, it appears that DoubleClick has not used sensitive data for any
online preference marketing product, in contravention of its stated online policy.
We understand that DoubleClick's Boomerang product takes user data from one
site to target advertising to the same user on other sites. However, the user
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profiles DoubleClick creates for its Boomerang clients for this targeting contains
only non-PII. Furthermore, we understand that for all new Boomerang clients,
DoubleClick requires by contract that the site disclose in its privacy policy that it
uses DoubleClick's services to target advertising to consumers, and DoubleClick
will not implement Boomerang on a site until such disclosures are posted. [FN16]
FN16. FTC January 22, 2001 Letter.
The letter also noted several commitments DoubleClick made to modifying its
privacy policy to "enhance its effectiveness," including allowing a user to request an
"opt out" cookie that would prevent DoubleClick from collecting information from
that user.
DISCUSSION
Defendants move to dismiss plaintiffs' claims, pursuant to Fed.R.Civ.P.
12(b)(6), for failure to state a claim upon which relief may be granted. In
considering a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), we accept as
true all material factual allegations in the Amended Complaint, Atlantic Mutual Ins.
Co. v. Balfour Maclaine Int'l, Ltd., 968 F.2d 196, 198 (2d Cir.1992), and may grant
the motion only where "it appears beyond doubt that the plaintiff can prove no set
of facts in support of his claim which would entitle him to relief." Still v. DeBuono,
101 F.3d 888, 891 (2d Cir.1996); see Conley v. Gibson, 355 U.S. 41, 48, 78 S.Ct.
99, 2 L.Ed.2d 80 (1957). "General, conclusory allegations need not be credited,
however, when they are belied by more specific allegations of the complaint."
Hirsch v. Arthur Andersen & Co., 72 F.3d 1085 (2d Cir.1995) (citing Jenkins v. S &
A Chaissan & Sons, Inc., 449 F.Supp. 216, 227 (S.D.N.Y.1978)); 5A Charles A.
Wright & Arthur R. Miller, Federal Practice and Procedure § 1363, at 464-65 (2d
ed.1990). In addition to the facts set forth in the Amended Complaint, we may
also consider documents attached thereto and incorporated by reference therein,
Automated Salvage Transp., Inc. v. Wheelabrator Envtl., Sys., Inc., 155 F.3d 59,
67 (2d. Cir.1998), matters of public record such as case law and statutes, Pani v.
Empire Blue Cross Blue Shield, 152 F.3d 67, 75 (2d. Cir.1998), and matters of
judicial notice. See Brass v. American Film Technologies, Inc., 987 F.2d 142, 150
(2d Cir.1993); Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir.1991).
Claim I.
Title II of the ECPA
Title II ("Title II") of the Electronic Communications Privacy Act ("ECPA"), 18
U.S.C. § 2701 et seq. (" § 2701"), aims to prevent hackers from obtaining,
altering or destroying certain stored electronic communications. See Sherman &
Co. v. Salton Maxim Housewares, Inc., 94 F.Supp.2d 817, 820 (E.D.Mich.2000)
("the ECPA was primarily designed to provide a cause of action against computer
hackers") (quoting State Wide Photocopy Corp. v. Tokai Fin. Serv., Inc., 909
F.Supp. 137, 145 (S.D.N.Y.1995)). It creates both criminal sanctions and a civil
right of action [FN17] against persons who gain unauthorized access to
communications facilities and thereby access electronic communications stored
102
incident to their transmission.
conduct as follows:
Title II specifically defines the relevant prohibited
FN17. 18 U.S.C. § 2707 ("§ 2707") creates a civil action against ECPA
violators by "any provider of electronic communication service, subscriber, or
other person aggrieved by a violation of this chapter in which the conduct
constituting the violation is engaged in with a knowing or intentional state of
mind ..."
"(a) Offense. Except as provided in subsection (c) of this section whoever(1)
intentionally accesses without authorization a facility through which an electronic
information service is provided; or (2) intentionally exceeds an authorization to
access that facility; and thereby obtains ... access to a wire or electronic
communication while it is in electronic storage in such system shall be
punished...."
Plaintiffs contend that DoubleClick's placement of cookies on plaintiffs' hard drives
constitutes unauthorized access and, as a result, DoubleClick's collection of
information from the cookies violates Title II. However, Title II contains an
exception to its general prohibition.
"(c) Exceptions.-Subsection (a) of this section does not apply with respect to
conduct authorized... (2) by a user of that [wire or electronic communications]
service with respect to a communication of or intended for that user;"
DoubleClick argues that its conduct falls under this exception. It contends that
the DoubleClick-affiliated Web sites are "users" of the Internet and that all of
plaintiffs' communications accessed by DoubleClick's cookies have been "of or
intended for" these Web sites. Therefore, it asserts, the Web sites' authorization
excepts DoubleClick's access from § 2701(a)'s general prohibition.
We must first address the threshold issue of whether DoubleClick's argument
that its conduct falls under a statutory exception is resolvable on a motion to
dismiss. Plaintiffs contend that the issue turns on whether exception § 2701(c)(2)
is considered an affirmative defense or a statutory element of the offense. As a
general matter, a plaintiff need not plead denials of affirmative defenses, see Harris
v. City of New York, 186 F.3d 243, 251 (2d Cir.1999) (citing 5 Charles Wright &
Arthur Miller, Federal Practice and Procedure: Civil 2d § 1276 (2d ed.1990 & 1999
pocket part)), whereas courts may dismiss a claim based on a statutory exception
that appears on the face of the complaint. See Orton v. Pirro, Collier, et al., No.
95 Civ. 3056, 1996 WL 18831, at *2 (S.D.N.Y. Jan. 18, 1996) (dismissing ECPA
Title III claim where statutory consent exception appeared in the complaint).
Examining the statute, it appears that § 2701(c) is a statutory exception.
First, § 2701(c) is entitled "Exceptions" and states "Subsection (a) of this section
does not apply with respect to conduct ..." *508 Second, § 2701(a) reinforces §
2701(c)'s function by carving our § 2701(c)'s exceptions in the very definition of
the offense: "§ 2701(a) Offense.-Except as provided in subsection (c) of this
section ..." Third, § 2707, the section that provides for a civil cause of action,
subsection (e), is entitled "Defense" and specifies three affirmative defenses to civil
103
claims under § 2707. Presumably, if Congress had intended § 2701(c)(1-3) to
constitute affirmative defenses, it could have labeled them as such as it did in §
2707. Fourth, nothing in the legislative history suggests that § 2701(c) should be
considered an affirmative defense instead of a statutory exception. Thus, if
DoubleClick's conduct falls into one of § 2701(c)'s exceptions on the face of the
pleadings, it is proper for us to dismiss the claim as one within a statutory
exception. Furthermore, even if § 2701(c) was construed as an affirmative
defense, the Second Circuit has held that a court may properly dismiss a claim on
the pleadings when an affirmative defense appears on its face. See Day v.
Moscow, 955 F.2d 807, 811 (2d Cir.1992) ( "[W]hen all relevant facts are shown by
the court's own records, of which the court takes notice, the [affirmative] defense
may be upheld on a Rule 12(b)(6) motion without requiring an answer"); see
generally 2 James Wm. Moore et al., Moore's Federal Practice § 12.34[4][b] (3d
ed.2000).
Assuming that the communications are considered to be in "electronic
storage," it appears that plaintiffs have adequately pled that DoubleClick's conduct
constitutes an offense under § 2701(a), absent the exception under § 2701(c)(2).
Therefore, the issue is whether DoubleClick's conduct falls under § 2701(c)(2)'s
exception. This issue has three parts: (1) what is the relevant electronic
communications service?; (2) were DoubleClick- affiliated Web sites "users" of this
service?; and (3) did the DoubleClick- affiliated Web sites give DoubleClick
sufficient authorization to access plaintiffs' stored communications "intended for"
those Web sites?
A. "Internet Access" is the relevant electronic communications service.
Obviously, in a broad sense, the "Internet" is the relevant communications
service. [FN18] However, for the purposes of this motion, it is important that we
define Internet service with somewhat greater care and precision. Plaintiff, at turns,
argues that the electronic communications service is "Internet access" and "the ISP
[Internet Service Provider]." Plaintiffs' Opposition Brief at 8, 12. The difference is
important. An ISP is an entity that provides access to the Internet; examples
include America Online, UUNET and Juno. Access to the Internet is the service an
ISP provides. Therefore, the "service which provides to users thereof the ability to
send or receive wire or electronic communications" is "Internet access."
FN18. The ECPA defines "electronic communications service" as "any service
which provides to users thereof the ability to send or receive wire or
electronic communications." 18 U.S.C. § 2510(15). In turn, "electronic
communications" are defined as "any transfer of signs, signals, writing,
images, sounds, data, or intelligence of any nature transmitted in whole or in
part by a wire, radio, electromagnetic, photoelectric, or photooptical system
that affects interstate or foreign commerce." 18 U.S.C. § 2510(12).
B. Web Sites are "users" under the ECPA.
104
The ECPA defines a "user" as "any person or entity who (A) uses an
electronic communication service; and (B) is duly authorized by the provider of
such service to engage in such use." 18 U.S.C. § 2510(13). On first reading, the
DoubleClick-affiliated Web sites appear to be *509 users--they are (1) "entities"
that (2) use Internet access and (3) are authorized to use Internet access by the
ISPs to which they subscribe. However, plaintiffs make two arguments that Web
sites nevertheless are not users. Both are unpersuasive.
First, plaintiffs argue that "[t]he most natural reading of 'user' is the person
who has signed up for Internet access, which means the individual plaintiffs and
Class members--not the Web servers." Plaintiffs' Opposition Brief at 12. Insofar
as this argument implies that the statute meant to differentiate between human
and non-human users, it is clearly contradicted by the statute's language that
defines a "user" as "any person or entity ..." (emphasis added). Furthermore, it
rests on the erroneous assumption that only human users "sign[ ] up for Internet
access," not Web sites or servers. This court takes judicial notice of the fact that
all people and entities that utilize Internet access subscribe to ISPs or are ISPs.
Although the vast majority of people who sign-up for Internet access from
consumer-focused ISPs such as America Online and Juno are individuals, every Web
site, company, university, and government agency that utilizes Internet access also
subscribes to an ISP or is one. These larger entities generally purchase "Internet
access" in bulk from ISPs, often with value-added services and technologically
advanced hardware. Nevertheless, they purchase the same underlying Internet
access as individual users. Therefore, plaintiffs fail to distinguish class members
from Web sites and servers based on whether they subscribe to an ISP for Internet
access.
Second, plaintiffs argue that "[t]he individual plaintiff ('user') owns the
personal computer ('facility'), while the Web sites she visits do not. [And that]
[u]nder basic property and privacy notions, therefore, only she can authorize
access to her own messages stored on that facility." Plaintiffs' Opposition Brief at
12. Again, plaintiffs seem to ignore the statute's plain language. The general rule
under § 2701(a) embodies plaintiffs' position that only those authorized to use a
"facility" may consent to its access. Nevertheless, Congress explicitly chose to make
§ 2701(a)'s general rule subject to § 2701(c)(2)'s exception for access authorized
by authors and intended recipients of electronic communications. Thus, plaintiffs'
argument is essentially that this Court should ignore § 2701(c)(2) because
Congress failed to take adequate account of "basic property and privacy notions."
However, it is not this Court's role to revisit Congress' legislative judgments.
One final point bears mention, even though plaintiffs did not raise it. One
could imagine a facially sensible argument that Web sites are not "users" of
Internet access because they are passive storage receptacles for information; the
human is the "user" and the Web site is what is used. However, the Internet's
engineering belies this description. Because the Internet functions through packetswitching and dynamic routing, human users do not in any sense connect to a
passive receptacle and obtain information. Indeed, no direct connection ever
105
exists between the human user and the Web site. Rather, the human user sends a
request to which the Web site must actively respond: processing the request,
deciding whether to provide the information sought, obtaining the document from
the server, translating the document into TCP/IP protocol, sending the packets and
awaiting confirmation of their arrival. Indeed, in a practical sense, Web sites are
among the most active "users" of Internet access--their existence and utility
depend on it, unlike humans. Therefore, we find as a matter of law that the
DoubleClick-affiliated Web sites are "users" of Internet access under the ECPA.
C. All of the communications DoubleClick has accessed through its cookies have
been authorized or have fallen outside of Title II's scope.
Because plaintiffs only allege that DoubleClick accessed communications from
plaintiffs to DoubleClick-affiliated Web sites, the issue becomes whether the Web
sites gave DoubleClick adequate authorization under § 2701(c)(2) to access those
communications. This issue, in turn, has two parts: (1) have the DoubleClickaffiliated Web sites authorized DoubleClick to access plaintiffs' communications to
them?; and (2) is that authorization sufficient under § 2701(c)(2)?
1. The DoubleClick-affiliated Web sites have consented to DoubleClick's
interception of plaintiffs' communications.
A plaintiff cannot survive a motion to dismiss a Title II claim based solely on
the naked allegation that defendant's access was "unauthorized." A plaintiff must,
"allege[ ] and proffer[ ] sufficient proofs to create a colorable claim that such
access was 'unauthorized.' " See Sherman & Co. v. Salton Maxim Housewares,
Inc., 94 F.Supp.2d 817, 820-821 (E.D.Mich.2000) (denying motion to amend
complaint because "proposed claim under the ECPA does not state a claim," despite
the fact plaintiff alleged access was unauthorized); cf. Hirsch v. Arthur Andersen &
Co., 72 F.3d 1085 (2d Cir.1995) ("General, conclusory allegations need not be
credited, however, when they are belied by more specific allegations of the
complaint.") (citation omitted). In the instant case, plaintiffs have proffered no
proofs whatsoever to support their bare assertion that Doubleclick's access was
unauthorized. What is more, every fact they do allege supports the inference that
the DoubleClick-affiliated Web sites did authorize DoubleClick's access.
Examining DoubleClick's technological and commercial relationships with its
affiliated Web sites, we find it implausible to infer that the Web sites have not
authorized DoubleClick's access. In a practical sense, the very reason clients hire
DoubleClick is to target advertisements based on users' demographic profiles.
DoubleClick has trumpeted this fact in its advertising, patents and Securities and
Exchange filings. See infra notes 28-29 and accompanying text. True, officers of
certain Web sites might not understand precisely how DoubleClick collects
demographic information through cookies and records plaintiffs' travels across the
Web. However, that knowledge is irrelevant to the authorization at issue--Title II in
no way outlaws collecting personally identifiable information or placing cookies, qua
such. All that the Web sites must authorize is that DoubleClick access plaintiffs'
communications to them. As described in the earlier section "Targeting Banner
106
Advertisements," the DoubleClick-affiliated Web sites actively notify DoubleClick
each time a plaintiff sends them an electronic communication (whether through a
page request, search, or GIF tag). The data in these notifications (such as the
name of the Web site requested) often play an important role in determining which
advertisements are presented to users. Plaintiffs have offered no explanation as to
how, in anything other than a purely theoretical sense, the DoubleClick-affiliated
Web sites could have played such a central role in the information collection and
not have authorized DoubleClick's access. This purely theoretical possibility that a
DoubleClick-affiliated Web site might have been so ignorant as to have been
unaware of the defining characteristic of DoubleClick's advertising service-- the
service the Web site knowingly and purposely purchased--and its own role in
facilitating that service, is too remote to be the basis for extensive and costly
discovery of DoubleClick and its affiliates. Therefore, we find that the DoubleClickaffiliated Web sites consented to DoubleClick's access of plaintiffs' communications
to them.
2. DoubleClick is authorized to access plaintiffs' GET, POST and GIF submissions to
the DoubleClick-affiliated Web sites.
Plaintiffs' GET, POST and GIF submissions to DoubleClick-affiliated Web sites
are all "intended for" those Web sites. In the case of the GET and POST
submissions, users voluntarily type-in information they wish to submit to the Web
sites, information such as queries, commercial orders, and personal information.
GIF information is generated and collected when users use their computer "mouse"
or other instruments to navigate through Web pages and access information.
Although the users' requests for data come through clicks, not keystrokes, they
nonetheless are voluntary and purposeful. Therefore, because plaintiffs' GET,
POST and GIF submissions to DoubleClick-affiliated Web sites are all "intended for"
those Web sites, the Web sites' authorization is sufficient to except DoubleClick's
access under § 2701(c)(2).
3. To the extent that the DoubleClick cookies' identification numbers are electronic
communications, (1) they fall outside of Title II's scope, and (2) DoubleClick's
access to them is otherwise authorized.
Plaintiffs argue that even if DoubleClick's access to plaintiffs' GET, POST and
GIF submissions is properly authorized under § 2701(c)(2), the cookie
identification numbers that accompany these submissions [FN19] are not because
they are never sent to, or through, the Web sites. However, this argument too is
unavailing.
FN19. This occurs in Step Three of the process as earlier described. See
supra "Targeting Banner Advertisements."
(a) The Cookies' identification numbers are not in "electronic storage" and
therefore are outside Title II's scope.
107
Putting aside the issue of whether the cookie identification numbers are
electronic communications at all, DoubleClick does not need anyone's authority to
access them. The cookies' long-term residence on plaintiffs' hard drives places
them outside of § 2510(17)'s definition of "electronic storage" and, hence, Title II's
protection. Section 2510(17) defines "electronic storage" as:
"(A) any temporary, intermediate storage of a wire or electronic communication
incidental to the electronic transmission thereof; and
(B) any storage of such communication by an electronic communication service
for the purpose of backup protection of such communication." (emphasis added)
Clearly, the cookies' residence on plaintiffs' computers does not fall into §
2510(17)(B) because plaintiffs are not "electronic communication service"
providers. [FN20]
FN20. 18 U.S.C. § 2510(15) defines an "electronic communications service"
as "any service which provides to users thereof the ability to send or receive
wire or electronic communications." Examples of providers in the Internet
world would include ISPs such as America Online, Juno and UUNET, as well
as, perhaps, the telecommunications companies whose cables and phone
lines carry the traffic. Nowhere do plaintiffs allege that they are electronic
service providers or allege facts that could give rise to this inference.
Section 2510(17)(A)'s language and legislative history make evident that
"electronic storage" is not meant to include DoubleClick's cookies either. Rather, it
appears that the section is specifically targeted at communications temporarily
stored by electronic communications services incident to their transmission--for
example, when an email service stores a message until the addressee downloads it.
The statute's language explicitly refers to "temporary, intermediate" storage.
Webster's Dictionary defines "temporary" as "lasting for a limited time," and
"intermediate" as "being or occurring at the middle place...." Webster's Third New
International Dictionary 2353, 1180 (1993). In other words, Title II only protects
electronic communications stored "for a limited time" in the "middle" of a
transmission, i.e. when an electronic communication service temporarily stores a
communication while waiting to deliver it.
The legislative history reveals that Congress intended precisely this limited
definition. In H. Rpt. 106-932 (2000), a House Report on a proposed amendment
to Title II, the House Judiciary Committee explained that " '(A)ny temporary,
intermediate storage' [in § 2510(17)(A) ] describes an e-mail message that is
being held by a third party Internet service provider until it is requested to be
read." Id. at note 6 (emphasis added). This definition is consistent with Congress'
statements in 1986, when it passed the ECPA. Sen. Rep. No. 99-541 (1986)'s entire
discussion of Title II deals only with facilities operated by electronic
communications services such as "electronic bulletin boards" and "computer mail
facilit[ies]," and the risk that communications temporarily stored in these facilities
could be accessed by hackers. It makes no mention of individual users'
computers, the issue in the instant case. Finally, Senator Patrick Leahy, a sponsor
108
of the ECPA in 1986, recently proposed an amendment to the definition of
"electronic storage" meant to clarify its scope. He proposed amending
2510(17)(A) to read:
(17) ["interim storage"] means(A) "any temporary, intermediate storage [by an electronic communication
service] of a wire or electronic communication incidental to the electronic
transmission thereof ..." S. 106-3083, Sec. 3(a)(4) (2000).
This amendment lends further support to the conclusion that Congress' intent was
to protect communications held in interim storage by electronic communication
service providers.
Turning to the facts of this case, it is clear that DoubleClick's cookies fall
outside § 2510(17)'s definition of electronic storage and, hence, § 2701' s scope.
Plaintiffs plead that in contrast to most cookies' ephemeral existence, DoubleClick
cookies remain on plaintiffs' computers "for a virtually indefinite time period," and
that their indefinite existence is critical to their function. [FN21] Amended
Complaint at ¶ 68. In plain language, "indefinite" existence is the opposite of
"temporary," and the DoubleClick cookies's residence on plaintiffs' hard drives is
certainly not an "intermediate" step in their transmission to another addressee.
This plain language controls in the absence of any legislative history suggesting
that Congress intended it to cover conduct like DoubleClick's. Indeed, if §
2510(17) were interpreted in the manner *513 plaintiffs advocate, Web sites would
commit federal felonies every time they accessed cookies on users' hard drives,
regardless of whether those cookies contained any sensitive information. This
expansive reading of a criminal statute runs contrary to the canons of statutory
interpretation and Congress' evident intent. See Jones v. United States, 529 U.S.
848, 120 S.Ct. 1904, 1907, 146 L.Ed.2d 902 (2000) ( "Ambiguity concerning the
ambit of criminal statutes should be resolved in favor of lenity [citation omitted],
and when choice must be made between two readings of what conduct Congress
has made a crime, it is appropriate, before choosing the harsher alternative, to
require that Congress should have spoken in language that is clear and definite.
[citation omitted]"); Lurie v. Wittner, 228 F.3d 113, 125-6 (2nd Cir.2000). Thus,
because the cookies and their identification numbers are never in "electronic
storage" under the ECPA, they are not protected by Title II and DoubleClick cannot
be held liable for obtaining them.
FN21. We note plaintiffs' allegation that the DoubleClick-affiliated Web sites'
responses to plaintiffs' requests are "placed in temporary, immediate [sic]
storage on the client [plaintiffs'] computers incidental to the transmission of
such electronic communications." Amended Complaint at ¶ 56. However,
this allegation clearly does not encompass the cookies or their identification
numbers because neither are ever sent from the DoubleClick-affiliated Web
sites to plaintiffs.
(b) If the DoubleClick cookies' identification numbers are considered stored
electronic communications, they are "of or intended for" DoubleClick and
DoubleClick's acquisition of them does not violate Title II.
109
Even if we were to assume that cookies and their identification numbers were
"electronic communication[s] ... in electronic storage," DoubleClick's access is still
authorized. Section 2701(c)(2) excepts from Title II's prohibition access,
authorized by a "user," to communications (1) "of" (2) "or intended for" that user.
In every practical sense, the cookies' identification numbers are internal
DoubleClick communications--both "of" and "intended for" DoubleClick.
DoubleClick creates the cookies, assigns them identification numbers, and places
them on plaintiffs' hard drives. The cookies and their identification numbers are
vital to DoubleClick and meaningless to anyone else. In contrast, virtually all
plaintiffs are unaware that the cookies exist, that these cookies have identification
numbers, that DoubleClick accesses these identification numbers and that these
numbers are critical to DoubleClick's operations.
In this sense, cookie identification numbers are much akin to computer barcodes or identification numbers placed on "business reply cards" found in
magazines. These bar-codes and identification numbers are meaningless to
consumers, but are valuable to companies in compiling data on consumer
responses (e.g. from which magazine did the consumer get the card?). Although
consumers fill-out business reply cards and return them to companies by mail, the
bar-codes and identification numbers that appear on the cards are purely internal
administrative data for the companies. The cookie identification numbers are
every bit as internal to DoubleClick as the bar-codes and identification numbers are
to business reply mailers. Therefore, it seems both sensible to consider the
identification numbers to be "of or intended for" DoubleClick and bizarre to describe
them as "of or intended for" plaintiffs. Accordingly, because the identification
numbers are "of or intended for" DoubleClick, it does not violate Title II for
DoubleClick to obtain them from plaintiffs' electronic storage.
To summarize, plaintiffs' GET, POST and GIF submissions are excepted from
§ 2701(c)(2) because they are "intended for" the DoubleClick-affiliated Web sites
who have authorized DoubleClick's access. The cookie identification numbers sent
to DoubleClick from plaintiffs' computers fall outside of Title II's protection because
they are not in "electronic storage" and, *514 even if they were, DoubleClick is
authorized to access its own communications.
In light of the above findings, we rule that all of plaintiffs' communications
accessed by DoubleClick fall under § 2701(c)(2)'s exception or outside Title II and,
accordingly, are not actionable. Therefore, plaintiffs' claim under the Title II
(Claim I) is dismissed.
Claim II.
Wiretap Act
Plaintiffs' second claim is that DoubleClick violated the Federal Wiretap Act
("Wiretap Act"), 18 U.S.C. § 2510, et seq. The Wiretap Act provides for criminal
punishment and a private right of action against: [FN22]
110
FN22. 18 U.S.C. § 2520 confers a private right of action to persons injured
by violations of the Wiretap Act.
"any person who--(a) intentionally intercepts, endeavors to intercept, or procures
any other person to intercept or endeavor to intercept wire, oral, or electronic
communication [except as provided in the statute]." 18 U.S.C. § 2511.
For the purposes of this motion, DoubleClick concedes that its conduct, as pled,
violates this prohibition. However, DoubleClick claims that its actions fall under an
explicit statutory exception:
"It shall not be unlawful under this chapter for a person not acting under color of
law to intercept a wire, oral, or electronic communication where such person is a
party to the communication or where one of the parties to the communication has
given prior consent to such interception unless such communication is intercepted
for the purpose of committing any criminal or tortious act in violation of the
Constitution or laws of the United States or any State." 18 U.S.C. § 2511(2)(d)
(" § 2511(2)(d)") (emphasis added).
DoubleClick argues once again that the DoubleClick-affiliated Web sites have
consented to its interceptions and, accordingly, that its conduct is exempted from
the Wiretap Act's general prohibition as it was from the Title II's. Plaintiffs deny
that the Web sites have consented and argue that even if the Web sites do consent,
the exception does not apply because DoubleClick's purpose is to commit "criminal
or tortious act[s]."
As a preliminary matter, we find that the DoubleClick-affiliated Web sites are
"parties to the communication[s]" from plaintiffs and have given sufficient consent
to DoubleClick to intercept them. In reviewing the case law and legislative
histories of Title II and the Wiretap Act, we can find no difference in their definitions
of "user" (Title II) and "parties to the communication" (Wiretap Act) or "authorize"
(Title II) and "consent" (Wiretap Act) [FN23] that would make our analysis of the
Web sites' consent under Title II inapplicable to the Wiretap Act. See discussion
supra Section I(C). Therefore, the issue before us is: assuming that DoubleClick
committed every act alleged in the Amended Complaint, could this evince a
"criminal or tortious" purpose on DoubleClick's part?
FN23. Indeed, courts have emphasized that "consent" must be construed
broadly under the Wiretap Act. See United States v. Amen, 831 F.2d 373,
378 (2d Cir.1987) ("Congress intended the consent requirement to be
construed broadly."); Griggs-Ryan v. Smith, 904 F.2d 112, 116 (1st
Cir.1990) (citing United States v. Willoughby, 860 F.2d 15, 19 (2d
Cir.1988)).
In light of the DoubleClick-affiliated Web sites' consent, plaintiffs must allege
"either (1) that the primary motivation, or (2) that a determinative factor in the
actor's [DoubleClick's] motivation for *515 intercepting the conversation was to
commit a criminal [or] tortious ... act." United States v. Dale, 991 F.2d 819, 841-
111
42 (D.C.Cir.1993), cert. denied 510 U.S. 1030, 114 S.Ct. 650, 126 L.Ed.2d 607
(1993) (quoting United States v. Vest, 639 F.Supp. 899, 904 (D.Mass.1986), aff'd,
813 F.2d 477 (1st Cir.1987)). However, in reviewing the sufficiency of plaintiffs'
allegations, we bear in mind that the mere existence of [a] lawful purpose alone
does not "sanitize a[n interception] that was also made for an illegitimate purpose."
Sussman v. ABC, 186 F.3d 1200, 1202 (9th Cir.1999), cert denied, 528 U.S. 1131,
120 S.Ct. 970, 145 L.Ed.2d 841 (2000).
Section 2511(2)(d)'s legislative history and caselaw make clear that the
"criminal" or "tortious" purpose requirement is to be construed narrowly, covering
only acts accompanied by a specific contemporary intention to commit a crime or
tort. The Wiretap Act originally exempted from its prohibition any interception of a
wire or oral communication where one of the parties to the communication
consented. See 2 U.S.Code Cong. & Ad.News, 90th Cong., 2d Sess., p. 2182
(1968). [FN24] However, Senator Phillip Hart objected that the exemption was too
permissive because it conceivably allowed a party to intercept a communication for
the purpose of breaking the law and injuring others. He feared that parties would
use secret recordings for "insidious purposes such as blackmail, stealing business
secrets, or other criminal or tortious acts in violation of Federal or State laws." Id.
at 2236. Senators Hart and McClellan proposed an amendment to narrow the
exemption to acts with "criminal, tortious or injurious" purposes, part of which was
enacted as § 2511(2)(d). The key distinction Senator Hart suggested should
distinguish permissible from impermissible one-party consent recordings by private
citizens was whether the defendant's intent in recording was to injure another
party. [FN25] Compare 114 Cong.Rec. 14694-14695 (May 23, 1968) ("Such oneparty consent is also prohibited when the party acts in any way with an intent to
injure the other party to the conversation in any other way ... For example, ... for
the purpose of blackmailing the other party, threatening him, or publicly
embarrassing him") with S.Rep. No. 90-1097 (1968) at 2236-37 ("There are, of
course, certain situations in which consensual electronic surveillances may be used
for legitimate purposes ... [as with recordings made] without intending in any way
to harm the nonconsenting party.") (emphasis added). Thus, the legislative record
suggests that the element of "tortious" or "criminal" mens rea is required to
establish a prohibited purpose under § 2511(2)(d).
FN24. The original language read: "It shall not be unlawful under this
Chapter for a party to any wire or oral communication, or a person given
prior authority by a party to this communication to intercept such
communication." S.Rep. No. 90-1097 (1968) at 12.
FN25. As a basic rule of interpreting legislative history, "[the] explanation of
the sponsor of the [statutory] language, is an 'authoritative guide to the
statute's construction." Bowsher v. Merck & Co., Inc., 460 U.S. 824, 832-33,
103 S.Ct. 1587, 75 L.Ed.2d 580 (1983) (citing North Haven Board of Educ. v.
Bell, 456 U.S. 512, 527, 102 S.Ct. 1912, 72 L.Ed.2d 299 (1982).
112
Plaintiffs attempt to meet § 2511(2)(d)'s "purpose" requirement by arguing
that their six non-Wiretap Act claims against DoubleClick "plead conduct that has
underlying it a tortious purpose and/or that translates into tortious acts." Plaintiffs'
Brief at 16. In other words, by virtue of its tortious acts, DoubleClick must have
had a tortious purpose.
Courts applying § 2511(2)(d) have consistently ruled that a plaintiff cannot
establish that a defendant acted with a "criminal or tortious" purpose simply by
proving that the defendant committed any tort or crime. Recently, in Sussman v.
ABC, 186 F.3d 1200 (9th Cir.1999) (Kozisnki, J.), the Ninth Circuit addressed a
case in which a plaintiff sued the American Broadcasting Companies, Inc. ("ABC")
under the Wiretap Act. The plaintiff argued that ABC could not avail itself of §
2511(2)(d) because the recording violated state privacy law and, therefore, ABC's
purpose was "tortious." Judge Kozinski, writing for a unanimous panel, rejected
plaintiff's argument and dismissed the Wiretap Act claim, explaining,
"[U]nder section 2511, 'the focus is not upon whether the interception itself
violated another law; it is upon whether the purpose for interception--its
intended use--was criminal or tortious ...' [citations omitted] Where the purpose
[of a taping] is not illegal or tortious, but the means are, the victims must seek
redress elsewhere ... Although ABC's taping may well have been a tortious
invasion under state law, plaintiffs have produced no probative evidence that ABC
had an illegal or tortious purpose when it made the tape." Id. at 1202.
The Ninth Circuit ruled similarly in Deteresa v. ABC, 121 F.3d 460 (9th
Cir.1997), holding, "Deteresa [plaintiff] contends that 'Radziwill and ABC
[defendants] were by the taping committing the aforesaid crimes and torts.' This
argument begs the question. For this claim to survive summary judgment,
Deteresa had to come forward with evidence to show that Radziwill taped the
conversation for the purpose of violating Cal.Penal Code § 632, for the purpose of
invading her privacy, for the purpose of defrauding her, or for the purpose of
committing unfair business practices. The record is devoid of any such evidence."
Id. at 467, n. 4.
The Seventh Circuit and Sixth Circuit have reached the same conclusion. In
another case involving ABC, J.H. Desnick v. ABC, 44 F.3d 1345, 1353 (1995)
(Posner, J.), the Seventh Circuit dismissed plaintiffs' CFAA claims because they
failed to allege that defendants' purpose was tortious. Like Judge Kozisnki, Judge
Posner held for a unanimous panel that the commission of a tortious act did not
prove a tortious purpose. He found that ("[t]he defendants did not order the
camera-armed testers into the Desnick Eye Center's premises in order to commit a
crime or tort. Maybe the program as it was eventually broadcast was tortious ...
But there is no suggestion that the defendants sent the testers into the Wisconsin
and Illinois officers for the purpose of defaming plaintiffs ... [defendants' allegedly
tortious act]"). Id. The Sixth Circuit similarly distinguished tortious conduct from
purpose based on mens rea, stating: " 'It is the use of the interception with intent
to harm rather than the fact of interception that is critical to liability....' " Boddie v.
ABC, 881 F.2d 267, 270 (6th Cir.1989) (emphasis added) (quoting By-Prod Corp. v.
113
Armen-Berry Co., 668 F.2d 956, 960 (7th Cir.1982)).
A number of district courts have interpreted § 2511(2)(d) in the same
manner. See, e.g., Medical Lab. Mgmt. Consultants v. ABC, 30 F.Supp.2d 1182,
1205 (D.Ariz.1998) ("[Plaintiffs] offer no support for the assertion that Defendants
recorded the meeting for the purpose of committing a tort, which, as the statute
indicates, is the proper focus of inquiry in a § 2511 claim. Even if Defendants were
found liable for fraud, the question is not whether they are ultimately liable for
conduct found to be tortious, but whether, at the time the recording took place,
they recorded the conversation *517 with the express intent of committing a
tort."); U.S. v. Kovolas, 1998 WL 452218,*4 (D.Mass. July 27, 1998) ("Kovolas
argues that because the recording itself was made in violation of state law, it was
made for the purpose of violating state law. The superficial logic of this argument
has been rejected by at least one court [citation omitted] ... if state law were to
render tortious conduct as defined by the very act of recording that Congress
sought to permit, the provisions of § 2511(d) would be rendered meaningless.");
Roberts v. Americable Intl., Inc., 883 F.Supp. 499, 503 (E.D.Ca.1995) (finding no
"tortious purpose" in case where "there is no evidence, nor even any allegations
that [defendant's] purpose in tape recording her supervisor was either criminal or
tortious outside any allegations of violation of the [state] privacy laws."); Payne v.
Norwest Corp., 911 F.Supp. 1299, 1304 (D.Mont.1995), aff'd in part, rev'd in part
and remanded on other grounds, 206 F.3d 92; United States v. DiFelice, 837
F.Supp. 81, 82 (S.D.N.Y.1993) ("Assuming that [the challenged] recordings
violated Massachusetts law, that fact by itself does not establish that he intercepted
the conversations 'for the purpose of committing [a] criminal or tortious act ...' ").
Plaintiffs seek to distinguish the weight of these precedents from the instant
case on the ground that the bulk of the above cases involved news gathering and
that Congress and courts have excepted this conduct on First Amendment
considerations. Specifically, they point to the 1986 amendment of § 2511(2)(d),
in which Congress reacted to a Sixth Circuit decision, Boddie v. American
Broadcasting Cos., 731 F.2d 333 (6th Cir.1984). When the Sixth Circuit decided
Boddie, § 2511(2)(d)'s one-party consent exception did not apply to interceptions
for the purpose of committing any "criminal, tortious, or other injurious act"
(emphasis added). In Boddie, the Sixth Circuit ruled that the clause "other
injurious act[s]" could provide a basis for holding defendants civilly liable, even
when they had violated no civil or criminal law. Id. at 339. Congress worried that
Boddie's broad interpretation of "injurious" could facilitate "attempts by parties to
chill the exercise of First Amendment rights through the use of civil remedies under
[the Wiretap Act]." S.Rep. No. 99-541, at 17 (1986) (Congress emphasized that it
did not want § 2511(2)(d) to be "a stumbling block in the path" of investigative
journalists who record conversations). In response, it removed "injurious" from
section § 2511(2)(d). Thus, the legislative history supports the contention that
Congress struck "injurious" conduct from § 2511(2)(d)'s one-party consent
exception partly out of concern for the press. See Medical Lab. Mgmt. Consultants,
30 F.Supp.2d 1182, 1205-06 (discussing legislative history of § 2511(2)(d) and
Congress' concern with protecting the media); Scott Golde, Media Organizations'
Exposure to Liability Under the Federal Wiretapping Act: The Medical Laboratory
114
Management Consultants Case, 76 Wash.U.L.Q. 431, 435 (1998).
However, plaintiffs overreach when they argue that Congress and the courts
created a general rule that "tortious purpose" exists wherever an intentional action
is later determined to have constituted a tort, save when journalism is involved.
Although Congress deleted "injurious" purpose from § 2511(2)(d) partly out of
concern for press freedom, it in no way indicated that the press enjoyed special
standing under the remaining terms of § 2511(2)(d). Had Congress wished to
confer special protection on the press, it could have done so explicitly. Courts
interpreting § 2511(2)(d) have drawn no distinction between media defendants
and the general public. In cases involving media defendants, they have consistently
grounded their demand for specific contemporary tortious or criminal purpose in §
2511(2)(d)'s general language and legislative history, not in an exception for the
media. See Sussman v. ABC, 186 F.3d at 1202 ("If the district court interpreted
section 2511 as containing a blanket exemption for journalists, we cannot agree.
Congress could have drafted the statute so as to exempt all journalists from its
coverage, but did not. Instead, it treated journalists just like any other party who
tapes conversations surreptitiously.") (emphasis added); J.H. Desnick v. ABC, 44
F.3d at 1353 (analysis did not rely on fact that recording was made for investigative
reporting, only that its purpose was non- tortious); Deteresa v. ABC, 121 F.3d 460,
467, n. 4 (analysis underlying finding that ABC did not violate § 2511(2)(d)
because it had no "tortious purpose," in no way distinguished between media and
non-media defendants). And in suits not involving journalism, courts have
demanded evidence of the same tortious or criminal purpose. See, e.g., Roberts v.
Americable Intl., Inc., 883 F.Supp. at 503 (finding no tortious purpose for recording
in a employment discrimination action because "[t]he facts do not show at this
point that [plaintiff] tape recorded to extort or blackmail her supervisor or
company, nor do the facts presently show that she engaged in tape recording to
cause emotional distress."); U.S. v. Kovolas, 1998 WL 452218 at *4 (criminal case
with no media party involved); United States v. DiFelice, 837 F.Supp. at 82
(criminal case with no media party involved); see also, Thomas v. Pearl, 998 F.2d
447, 451 (7th Cir.1993) (in civil suit between basketball player and coach, Seventh
Circuit held that "[Plaintiff] must show that [defendant] either intended to break the
law or commit a tort against him in order to prove a violation of the federal
statute.").
In the instant case, plaintiffs clearly allege that DoubleClick has committed a
number of torts. However, nowhere have they alleged that DoubleClick's "primary
motivation" or a "determining factor" in its actions has been to injure plaintiffs
tortiously. The Amended Complaint does not articulate any facts that could
support an inference that DoubleClick accessed plaintiffs' electronic communications
with the "insidious" intent to harm plaintiffs or others. In fact, everything in the
Amended Complaint suggests that DoubleClick has been consciously and
purposefully executing a highly- publicized market-financed business model in
pursuit of commercial gain--a goal courts have found permissible under §
2511(2)(d). [FN26] Its technology and business strategy have been described, and
indeed promoted, in the company's Security and Exchange Commission ("SEC")
filings [FN27] and have been the focus of numerous articles in prominent
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periodicals and newspapers. [FN28] Indeed, the intricate details of each
proprietary technology challenged by plaintiffs are public record in DoubleClick's
patents. See, e.g., U.S. Patent No. 5,948,061 (issued September 7, 1999).
DoubleClick's purpose has plainly not been to perpetuate torts on millions of
Internet users, but to make money by providing a valued service to commercial
Web sites. If any of its practices ultimately prove tortious, then DoubleClick may
be held liable for the resulting damage. However, a culpable mind does not
accompany every tortious act. In light of the abundant evidence that DoubleClick's
motivations have been licit and commercial and the utter lack of evidence that its
intent has been tortious, we find as a matter of law that plaintiffs have failed to
allege that DoubleClick has acted with a "tortious" purpose.
FN26. See Berger v. Cable News Network, Inc., No. 94-46-BLG-JDS, 1996
WL 390528, at *3 (D.Mont. Feb. 26, 1996) ("[§ 2511(2)(d) ] does not apply
because this Court does not find that defendants made the recordings for the
purpose of committing a crime or tortious act. Instead, the recordings were
made for the purpose of producing a news story and for the defendants'
commercial gain."), aff'd in part, rev'd in part, 129 F.3d 505 (9th Cir.1997),
vacated and remanded, 526 U.S. 808, 119 S.Ct. 1706, 143 L.Ed.2d 978
(1999), aff'd in relevant part, 188 F.3d 1155 (9th Cir.1999); see also Russell
v. ABC, No. 94 C 5678, 1995 WL 330920, at * 1, 1995 U.S.Dist.LEXIS 7528,
at *4 (N.D.Ill. May 30, 1995) (citing, Desnick v. ABC, Inc., 44 F.3d at 135354).
FN27. See, e.g.,; DoubleClick, Inc., 10-K SEC filing (Dec. 31, 1999) at 4-5;
DoubleClick, Inc., 10-K (Dec. 31, 1998) at 1-2, 6; DoubleClick, Inc., S-1
SEC filing (Dec. 16, 1997) at 3-4.
FN28. Media attention to privacy concerns with DoubleClick's technology predated the instant lawsuit. See, e.g., Rachel Scheier, Internet privacy
concerns DoubleClick's increasing power to compile info on Web users at
issue, New York Daily News, January 27, 2000; Jennifer Tanaka, Getting
Personal; Online shoppers will spend nearly $10 billion this holiday season.
They'll surrender some of their privacy along with the cash, Newsweek,
November 22, 1999; Robert O'Harrow Jr., Global Savvy Web 'Bug's' Impact
on Privacy Draws Scrutiny Internet; Regulators are looking at stealth tool
that tracks online users' activities and soon may be used to identify them by
name, Los Angeles Times, November 15, 1999 at C2; Andrea Petersen and
Jon G. Auerbach, Online Ad Titans Bet Big in Race to Trace Consumers' Web
Tracks, Wall St. J., November 8, 1999 at B1; Leslie Miller and Elizabeth
Weise, FTC studies 'profiling' by Web sites, USA Today, November 8, 1999,
at 1A; Leslie Walker, Time to Let the Cookies Crumble?, Washington Post,
November 4, 1999 at E1; Hiawatha Bray, They're watching you; More and
more Web sites are tracking their users habits, Should you care?, The Boston
Globe, February 11, 1999 at G6; Colin Beaven, They're watching you;
116
Internet advertising tracking companies; includes a related article on
Internet cookies, Esquire, August, 1997, No. 2, Vol. 128 at 104; Julia
Angwin, Got Cookies?, S.F. Chron., March 11, 1997 at C4.
To summarize, we find that the DoubleClick-affiliated Web sites are "parties"
to plaintiffs' intercepted communications under the Wiretap Act and that they
consent to DoubleClick's interceptions. Furthermore, we find that plaintiffs have
failed to allege that DoubleClick has intercepted plaintiffs' communications for a
"criminal or tortious" purpose. Accordingly, we find that DoubleClick's actions are
exempted from liability under the Wiretap Act by § 2511(2)(d) and, thus, we
dismiss Claim II.
Count III. Computer Fraud and Abuse Act
Plaintiffs' final federal claim is under the Computer Fraud and Abuse Act
("CFAA"), 18 U.S.C. § 1030, et seq. ("§ 1030") The CFAA provides:
"[18 U.S.C. § 1030] (a)--whoever ... (2)(c) intentionally accesses a computer
without authorization, or exceeds authorized access, and thereby obtains ...
information from any protected computer if the conduct involved an interstate or
foreign communication ... shall be punished as provided in subsection (c) of this
section."
The CFAA also provides a civil right of action for victims under 18 U.S.C. § 1030(g)
("§ 1030(g)"):
"(g) Any person who suffers damage or loss by reason of a violation of this
section may maintain a civil action against the violator to obtain compensatory
damages and injunctive relief or other equitable relief. Damages for violations
involving damage as defined in section (e)(8)(A) are limited to economic damages
..."
However, section 18 U.S.C. § 1030(e)(8) ("§ 1030(e)(8)") limits the
"damage" civilly recoverable to the following instances:
"(e)(8) the term 'damage' means any impairment to the integrity or availability of
data, a program, a system, or information that--(A) causes loss aggregating at
least $5,000 in value during any 1-year period to one or more individuals; [B.
Impairs medical care; C. Causes physical injury; D. Threatens public health or
safety]." (emphasis added).
For the purposes of this motion, DoubleClick does not contest that plaintiffs'
computers were "protected" under the CFAA or that its access was unauthorized.
Instead, it claims that § 1030(e)(8) creates a $5,000 damages threshold for each
individual class member and that plaintiffs have failed to plead these damages
adequately. Plaintiffs argue that "loss" under § 1030(g) is distinct from "damage"
and, accordingly, is not subject to § 1030(e)(8)'s damage threshold. In the
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alternative, if § 1030(e)(8)'s damage threshold is found applicable to plaintiffs'
claims, plaintiffs argue that they easily meet the threshold by "aggregating" losses
for the entire class over "any 1-year period."
A. "Loss" pled under 18 U.S.C. § 1030(g) is subject to § 1030(e)(8)'s $5,000
statutory minimum damages.
The first issue is whether "loss" pled under § 1030(g) is subject to §
1030(e)(8)'s $5,000 statutory minimum damages--a question of statutory
interpretation. The Supreme Court recently reviewed the basic canons of statutory
interpretation in Robinson v. Shell Oil Co., 519 U.S. 337, 340-41, 117 S.Ct. 843,
136 L.Ed.2d 808 (1997). It explained:
"Our first step in interpreting a statute is to determine whether the language at
issue has a plain and unambiguous meaning with regard to the particular dispute
in the case. Our inquiry must cease if the statutory language is unambiguous
and 'the statutory scheme is coherent and consistent.' [citations omitted]. The
plainness or ambiguity of statutory language is determined by reference to the
language itself, the specific context in which that language is used, and the
broader context of the statute as a whole."
See Washington v. Schriver, 240 F.3d 101, 108 (2d Cir. Jan.5, 2001).
However, where a statute's language conveys no "plain and unambiguous
meaning," it is deemed "ambiguous" and a court may look to "legislative history
and other extrinsic material" in interpreting it. Oklahoma v. New Mexico, 501 U.S.
221, 235 n. 5, 111 S.Ct. 2281, 115 L.Ed.2d 207 (1991) (citations omitted); see
Washington, 240 F.3d at 108.
Sections 1030(g) and 1030(e)(8)(A)'s language concerning "loss" is plainly
inconsistent. On its face, § 1030(e)(8)(A)'s definition of "damage" explicitly
includes "loss." See § 1030(e)(8)(A) ("the term 'damage' means any impairment
... that--(A) causes loss aggregating at least $5,000 in value during any 1-year
period to one or more individuals") (emphasis added). In order to find that "loss"
under § 1030(g) is not subject to the $5,000 "damage" threshold, one would have
to accept that Congress created two definitions of "loss"--one under § 1030(g) that
is not subject to § 1030(e)(8)'s $5,000 threshold, and one under § 1030(e)(8)
that is clearly subject to the threshold--without explicitly defining or differentiating
either. In contrast, the statute gives a clear definition of "damage" in §
1030(e)(8) to which it explicitly refers in § 1030(g).
Nevertheless, a "cardinal principle of statutory construction [is] that we must
'give effect, if possible, to every clause and word of a statute,' " Williams v. Taylor,
529 U.S. 362, 404, 120 S.Ct. 1495, 146 L.Ed.2d 389 (2000) (quoting United States
v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 99 L.Ed. 615 (1955)) and this
principle supports two arguments for reading "loss" outside of § 10(e)(8)(A)'s
exception. First, the fact that § 1030(g) uses the word "loss" in addition to
damage suggests that the words have different meanings. See United States v.
Bernier, 954 F.2d 818, 819- 20 (2d Cir.1992) (in interpreting statutory clause
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"second or subsequent," the Second Circuit ruled that "[w]hile it is conceivable that
the word 'subsequent' is used as a synonym for the word 'second' in [the clause],
the use of the connector 'or' (rather than 'and'), and the absence of commas
around the 'or subsequent' phrase, suggest that each word in the statute was
meant to be different; hence the use of different words.") Second, § 1030(g)
states that "[d]amages for violations involving damage as defined in subsection
(e)(8)(A) are limited to economic damages." The fact that the statute chooses to
limit this clause to "violations involving damage as defined in subsection (e)(8)(A),"
suggests that it recognizes "damages" outside of subsection (e)(8)(A) as well.
Otherwise, the limitation would be meaningless.
In light of the obvious facial contradictions, we find that the CFAA is
ambiguous about whether "loss" pled under § 1030(g) is subject to § 1030(e)(8)'s
$5,000 threshold. Accordingly, we turn to its legislative history for further
guidance. The only explanation in the legislative record for why § 1030(g) refers
to both "damage" and "loss" is found in the 1996 Senate Report, S.Rep. No. 104357 (1996). It stated:
The 1994 amendment [to § 1030(g) ] required both 'damage' and
'loss,' but it is not always clear what constitutes 'damage.' For
example, intruders often alter existing log-on programs so that user
passwords are copied to a file which the hackers can retrieve later.
After retrieving the newly created password file, the intruder restores
the altered log-on file to its original condition. Arguably, in such a
situation, neither the computer nor its information is damaged.
Nonetheless, this conduct allows the intruder to accumulate valid user
passwords to the system, requires all system users to change their
passwords, and requires the system administrator to devote resources
to resecuring the system. Thus, although there is arguably no
'damage,' the victim does suffer 'loss.' If the loss to the victim meets
the required monetary threshold, the conduct should be criminal, and
the victim should be entitled to relief. The bill therefore defines
'damage' in new subsection 1030(e)(8), with a focus on the harm that
the law seeks to prevent. As in the past, the term 'damage' will
require either significant financial losses under section 1030(e)(8)(A),
or potential impact on medical treatment under section 1030(e)(8)(B)
... Under the bill, damages recoverable in civil actions by victims of
computer abuse would be limited to economic losses for violations
causing losses of $5,000 or more during any 1-year period. (emphasis
added).
S.Rep. No. 104-357 seems to make clear that Congress intended the term "loss" to
target remedial expenses borne by victims that could not properly be considered
direct damage caused by a computer hacker. The term "loss" was not meant to
except certain injuries from § 1030(e)(8)(A)'s damages threshold. [FN29] Indeed,
S.Rep. No. 104-357's declaration that "If the loss to the victim meets the required
monetary threshold, the conduct should be criminal, and the victim should be
entitled to relief" (emphasis added), leaves no doubt but that "loss" under §
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1030(g) remains subject to § 1030(e)(8)(A)'s $5,000 threshold. This reading is
consistent with Congress' general intent to limit federal jurisdiction to cases of
substantial computer crimes. [FN30]
FN29. Senator Patrick Leahy, a sponsor of the ECPA in 1984, recently
introduced a bill, the Enhancement of Privacy and Public Safety in
Cyberspace Act, S. 3083, 106th Cong. (2000), in the Senate that expressly
seeks to clarify (1) what constitutes "loss," and (2) that "loss" is subject to
the $5,000 monetary threshold. See Cong. Rec. S8823, 106th Cong. (Sep.
20, 2000). The relevant of provision of that bill, is completely consistent
with S.Rep. No. 104-357's explanation of "loss." It states:
"(10) the term 'loss' includes-'(A) the reasonable costs to any victim of-'(i) responding to the offense;
'(ii) conducting a damage assessment; and
'(iii) restoring the system and data to their condition prior to the offense;
and
'(B) any lost revenue or costs incurred by the victim as a result of
interruption of service.';"
Prior Senate Report, S. Rep No. 101-544 (1990), further supports this
conclusion. It explained that the proposed private right of action, later
codified as § 1030(g), "would create a civil cause of action for those who
suffer violations of the Computer Fraud and Abuse Act. Plaintiffs would still
have to meet the [then] $1,000 threshold ..." (emphasis added). It is
noteworthy that the 1990 Report makes all injuries from CFAA "violations"
subject to 1030(e)(8)(A)'s threshold, not just "damages." See also S.Rep.
No. 99-432, at 2482-2483 ("the [Senate] Committee intends to make clear
that losses caused by the same act may be aggregated for purposes of
meeting the [then] $1,000 threshold.") (emphasis added); 132 Cong. Rec.
S14453 (daily ed. Oct. 1, 1986) (statement of co- sponsor Sen. Trible) ("In
addition, the concept of 'loss' embodied in this paragraph will not be limited
solely to the cost of actual repairs. The Justice Department has suggested
that other costs, including the cost of lost computer time necessitated while
repairs are being made, be permitted to count toward the [then] $1,000
valuation. I and the other sponsors of this bill agree.").
FN30. Senator Laxalt, one of the CFAA's sponsors, explained that the
monetary threshold was meant, "first, to distinguish between alterations that
should fairly be treated as misdemeanors and those that should be treated as
felonies; and second, to limit federal jurisdiction to the felonious alterations.
Setting a specific loss value is one way to achieve this end ..." 132 Cong.
Rec. S4072 (daily ed. Apr. 10, 1986) (statement of Sen. Laxalt regarding
(a)(5)) (emphasis added); see also 132 Cong. Rec. S14453 (daily ed. Oct.
1, 1986) (statement of co- sponsor Sen. Trible) ("This bill will assert Federal
jurisdiction over computer crimes only in those cases in which there is a
compelling Federal interest. This reflects my belief and the Judiciary
120
Committee's belief that the States can and should handle most such crimes,
and that Federal jurisdiction in this area should be asserted narrowly."); see
also Congr. Rec. S8823, 106th Cong. (Sep. 20, 2000) (Senator Leahy
explaining that the damage threshold's purpose is to limit federal jurisdiction
to major crimes).
Caselaw further supports the conclusion that all injuries under § 1030(g) are
subject to § 1030(e)(8)'s $5,000 threshold, whether termed "damage" or "loss."
In Letscher v. Swiss Bank Corp., 1996 WL 183019, 1996 U.S. Dist. LEXIS 4908
(S.D.N.Y. April 16, 1996), Judge Sand dismissed a former employee's claim that his
employer violated the CFAA by allegedly procuring his personal credit report
without authorization. Letscher claimed that Swiss Bank's violation "caused him to
'invest[ ] his time, money, and talent requesting reports, making telephone calls,
and writing letters causing him emotional distress and anguish.' " Id. 1996 WL
183019 at *2. The "time, money, [ ] talent, and [efforts]" for which Letscher
sought compensation were clearly "losses" to him, not compensation for "damage"
to the integrity of his data or computer. Nevertheless, Judge Sand held that
Letscher's losses were still subject to § 1030(e)(8)(A)'s $5,000 threshold and
dismissed his claim finding that these losses were not "economic." Id.
In America Online, Inc. v. LCGM, 46 F.Supp.2d 444, 451 (E.D.Va.1998),
America Online, Inc. ("AOL") alleged that LCGM secretly collected AOL members'
email addresses without AOL's authorization and then employed deceptive
techniques to "spam" (i.e. to e-mail en masse) AOL members. The facts in AOL v.
LCGM are quite similar to the hypothetical in S. Rep No. 101-544 that illustrated
the difference between "loss" and "damage"--there was no "damage" to the
function of AOL's system or the data within it, only plaintiff's "loss" from
defendant's trespass. Nonetheless, the court required a finding that AOL's losses
exceeded the "$5,000, the statutory threshold requirement" before it granted
summary judgment. Id. at 450. Thus, it is clear that plaintiffs' alleged injuries,
whether described as "damage" or "loss," are subject to § 1030(e)(8)(A)'s $5,000
threshold.
B. Plaintiffs fail to allege facts that could support a finding that their injuries meet
§ 1030(e)(8)(A)'s $5,000 threshold
Turning to the instant case, plaintiffs seek damages for their " 'loss'--an
invasion of their privacy, a trespass to their personal property, and the
misappropriation of confidential data by DoubleClick ... [as well the cost of the]
affirmative steps [plaintiffs must take] to negate DoubleClick's wrongful
unauthorized access of their computers." Plaintiffs' Opposition Brief at 23. They
argue that in determining whether plaintiffs have met § 1030(e)(8)(A)' s $5,000
threshold, damages should be aggregated across all plaintiffs and all of
DoubleClick's acts for any given year.
1. Damages and losses under § 1030(e)(8)(A) may only be aggregated across
victims and time for a single act.
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As a preliminary matter, we find that damages and losses under §
1030(e)(8)(A) may only be aggregated across victims and over time for a single
act. The relevant clause states that "the term 'damage' means any impairment to
the integrity or availability of data, a program, a system, or information that--(A)
causes loss aggregating at least $5,000 in value during any 1-year period to one or
more individuals." The fact that § 1030(e)(8)(A) is phrased in the singular ("any
impairment to the integrity or availability of data, a program, a system, or
information that--(a) causes loss"), rather than the plural (e.g., any impairments to
the integrity or availability of data, programs, systems, or information that--(a)
cause loss ... ), indicates that § 1030(e)(8)(A) should only apply to single acts.
The legislative history clarifies that this was Congress' intent. The Senate Judiciary
Committee's report that accompanied the CFAA, Sen. R. No. 99- 132, explains:
"The Committee does not intend that every victim of acts proscribed under
[1030(e)(8)(A) ] must individually suffer a loss of [then] $1,000. Certain types
of malicious mischief may cause smaller amounts of damage to numerous
individuals, and thereby collectively create a loss of more than $1,000. By using
'one of more others', [FN31] the Committee intends to make clear that losses
caused by the same act may be aggregated for the purposes of meeting the
[then] $1,000 threshold." Id. at 5 (emphasis added).
FN31. The word "others" was replaced by "individuals" in the final bill.
This interpretation is consistent with Congress' overall intent to limit the
CFAA to major crimes. See supra note 31. In contrast, plaintiffs cite no authority
to support their reading of § 1030(e)(8)(A). Therefore, we find that §
1030(e)(8)(A) only allows aggregation of damage over victims and time for a single
act.
2. Plaintiffs have failed to allege facts that could support a finding that plaintiffs
suffered over $5,000 in damages and losses from any single act by DoubleClick.
In order to determine plaintiffs' damages and losses stemming from any
single prohibited act by DoubleClick, we must first determine what constitutes a
single act under § 1030(e)(8)(A). Examining § 1030(a)(2)(C), the relevant
subsection, it is apparent that the definition of a prohibited act turns on the
perpetrator's access to a particular computer. The prohibition is phrased in the
singular: "[whoever] intentionally accesses a computer without authorization ...
and thereby obtains ... (C) information from any protected computer ..." §
1030(a)(2)(C) (emphasis added). [FN32] Thus, the suggestion that DoubleClick's
accessing of cookies on millions of plaintiffs' computers could constitute a single act
is refuted by the statute's plain language. Nevertheless, the statute is ambiguous
about the scope of a single prohibited act on any one computer. One could
reasonably argue from § 1030(a)(2)(C)'s text that DoubleClick commits a violation
each time it accesses a cookie on a plaintiff's hard drive. However, one could also
plausibly maintain that DoubleClick's systematic uploading of data from a cookie on
a particular computer's hard drive constitutes a single act of "access," even though
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it occurs over multiple electronic transactions. For the purposes of this motion, we
need not choose between these two interpretations because even on the more
liberal, plaintiffs fail to plead facts that could meet the damages threshold.
FN32. We recognize that statute covers information "from any protected
computer," meaning that a single act could involve information from multiple
computers. For example, if someone accessed a White House computer and
through that computer erased information on State Department, Central
Intelligence Agency, and FBI computers, the value of these damages and
losses could be aggregated for the purposes of meeting § 1030(e)(8)(A)'s
damages threshold. However, in the instant case, DoubleClick individually
accessed each plaintiff's computer and obtained no information through it
from other computers.
Plaintiffs essentially plead two bases of "damage or loss": (1) their cost in
remedying their computers and data in the wake of DoubleClick's access, and (2)
the economic value of their attention (to DoubleClick's advertisements) and
demographic information. [FN33] Clearly, any economic losses plaintiffs bore in
securing or remedying their systems in the wake of DoubleClick's alleged CFAA
violations would count towards § 1030(e)(8)(A)'s damage threshold. See supra
note 30 and accompanying text. However, as counsel demonstrated at oral
argument, users may easily and at no cost prevent DoubleClick from collecting
information by simply selecting options on their browsers or downloading an "optout" cookie from DoubleClick's Web site. See Transcript of February 22, 20001
Oral Argument at 15- 18. Similarly, they have not pled that DoubleClick caused
any damage whatsoever to plaintiffs' computers, systems or data that could require
economic remedy. Thus, these remedial economic losses are insignificant if,
indeed, they exist at all.
FN33. Insofar as plaintiffs allege that they suffered emotional distress due to
DoubleClick's "invasion of their privacy, [ ] trespass to their personal
property, and [ ] misappropriation of confidential data," their injuries not
actionable because only economic losses are recoverable under § 1030(g).
See Letscher, 1996 WL 183019, at *2, 1996 U.S. Dist. LEXIS 4908, at *7;
see also S. Rep No. 101-544 (1990) ("Damages [under § 1030(e)(8) (A) ]
are limited to economic damages, except for violations of the medical records
section, when pain and suffering damages would be permitted.")
Plaintiffs also contend that they have suffered economic damages consisting
of the value of: (1) the opportunity to present plaintiffs with advertising; and (2)
the demographic information DoubleClick has collected. See Transcript of February
22, 2001 Oral Argument at 47, 54. Essentially, they argue that because
companies pay DoubleClick for plaintiffs' attention (to advertisements) and
demographic information, the value of these services must, in some part, have
123
rightfully belonged to plaintiffs. They point to AOL in which the court appeared to
hold that damage to "reputation and goodwill" counted towards the damage
threshold and argue that, by the same logic, the economic value of their attention
and demographic information should count as well. See AOL, 46 F.Supp.2d at 451.
Even assuming that the economic value of plaintiffs' attention and
demographic information could be counted towards the monetary threshold--a
dubious assumption [FN34]--it would still be insufficient. We do not commonly
believe that the economic value of our attention is unjustly taken from us when we
choose to watch a television show or read a newspaper with advertisements and we
are unaware of any statute or caselaw that holds it is. We see no reason why Web
site advertising should be treated any differently. A person who chooses to visit a
Web page and is confronted by a targeted advertisement is no more deprived of his
attention's economic value than are his off-line peers. Similarly, although
demographic information is valued highly (as DoubleClick undoubtedly believed
when it paid over one billion dollars for Abacus), the value of its collection has
never been considered a economic loss to the subject. Demographic information is
constantly collected on all consumers by marketers, mail-order catalogues and
retailers. [FN35] However, we are unaware of any court that has held the value of
this collected information constitutes damage to consumers or unjust enrichment to
collectors. Therefore, it appears to us that plaintiffs have failed to state any facts
that could support a finding of economic loss from DoubleClick's alleged violation of
the CFAA.
FN34. AOL, 46 F.Supp.2d at 444, is unpersuasive on this point. Its reference
to "reputation and goodwill" occurs in a one-line recitation of plaintiff's
alleged bases for damages. The Virginia court offered no statutory, caselaw
or legislative analysis to support its categorization of "reputation and
goodwill" as economic damages in this context. In the absence of any
discussion or authority to support its conclusion, AOL is unconvincing. In a
broader sense, this type of damage seems far removed from the damage
Congress sought to punish and remedy in the CFAA--namely, damage to
computer systems and electronic information by hackers.
FN35. See, e.g., Jeff Sovern, Opting In. Opting Out, Or No Options At All:
The Fight For Control Of Personal information, 74 Wash. L.Rev. 1033, 1036
(1999) ("The Direct Marketing Association, a trade association, estimates
that more than 15,000 consumer mailing lists exist, containing some two
billion names (including duplicates). More than 1000 commercial services
are said to broker lists ... Internet sites, and even Westlaw, have databases
designed to locate individuals and to report on their transactions--including
their bankruptcy records, lawsuits, liens, real property refinancings, and
transfers--and the location of their assets. Other Internet sites list driver's
license and motor vehicle information, and verify Social Security numbers.")
(citations omitted).
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Nevertheless, to the extent that some value could be placed on these losses,
we find that the plaintiffs have failed to allege facts that could support the inference
that the damages and losses plaintiffs incurred from DoubleClick's access to any
particular computer, over one year's time, could meet § 1030(e)(8)(A)'s damage
threshold. Accordingly, Count III of the Amended Complaint is dismissed.
Conclusion Concerning Federal Claims
Plaintiffs' Amended Complaint fails to plead violations of any of the three
federal statutes under which they bring suit. The absence of evidence in the
legislative or judicial history of any of these Acts to suggest that Congress intended
to prohibit conduct like DoubleClick's supports this conclusion. To the contrary, the
histories of these statutes reveal specific Congressional goals--punishing destructive
hacking, preventing wiretapping for criminal or tortious purposes, securing the
operations of electronic communication service providers--that are carefully
embodied in these criminal statutes and their corresponding civil rights of action.
Furthermore, DoubleClick's practices and consumers' privacy concerns with
them are not unknown to Congress. Indeed, Congress is currently considering
legislation that specifically recognizes and regulates the online harvesting of user
information. For example, the "Consumer Internet Privacy Enhancement Act," H.R.
237, 107th Cong. (2001), now pending before a House Committee, imposes
substantial notice and opt-out requirements on Web site operators who, unlike
DoubleClick, compile personally identifiable information from users. See also, The
Online Privacy protection Act of 2001, H.R. 89, 107th Cong. (2001); Electronic
Privacy Protection Act, H.R. 112, 107th Cong. (2001); Social Security Online
Privacy Protection Act, H.R. 91, 107th Cong. (2001); Consumer Privacy Protection
Act, S. 2606, 106th Cong. (2000). [FN36] Although proposed legislation has no
formal authoritative weight, it is evidence that Congress is aware of the conduct
plaintiffs challenge and is sensitive to the privacy concerns it raises. Where
Congress appears to have drawn the parameters of its regulation carefully and is
actively engaged in the subject matter, we will not stray from its evident intent.
FN36. Interestingly, some of these proposals seem to make exceptions for
conduct like DoubleClick's. For example, H.R. 237 does not impose these
requirements on Web sites that harvest non-personally-identifiable
information--a category into which DoubleClick falls--and H.R. 112 explicitly
excepts "cookies" from its scope of regulated data-harvesting technologies.
See § 2(e)(2)(B), H.R. 112, 107th Cong. (2001).
Counts IV--VII.
Remaining State Claims
For the reasons set out above, we have dismissed plaintiffs' federal claims
which were the sole predicate for federal jurisdiction. When federal claims are
dismissed, retention of state law claims under supplemental jurisdiction is left to
125
the discretion of the trial court. See 28 U.S.C. § 1367(c)(3)(1994)("[d]istrict
courts may decline to exercise supplemental jurisdiction over a claim ... if ... (3) the
district court has dismissed all claims over which it has original jurisdiction.");
Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir.1994); In re Merrill Lynch Ltd.
P'ships Litig., 7 F.Supp.2d 256, 258 (S.D.N.Y.1997). We decline to exercise
supplemental jurisdiction over plaintiffs' state law claims. Accordingly, the
remaining counts of plaintiffs' Amended Complaint are dismissed as well.
CONCLUSION
For the foregoing reasons, defendant's motion to dismiss is granted and plaintiffs'
*527 Amended Complaint is dismissed with prejudice. [FN37]
FN37. Because dismissal on the pleadings constitutes a "terminat [ion]"
under 28 U.S.C. § 1407(a), the two cases transferred to this Court by the
Judicial Panel on Multidistrict Litigation, Steinbeck v. DoubleClick, 00 Civ.
5705, C.A, N.O. 8:00-98 (C.D.Cal) and Freedman v. DoubleClick, 00 Civ.
7194, 2:00-1559 (E.D.La), need not be remanded. See Humphreys v. Tann,
487 F.2d 666 (6th Cir.1973), cert denied, 416 U.S. 956, 94 S.Ct. 1970, 40
L.Ed.2d 307 (1974); see also Lexecon Inc. v. Milberg Weiss Bershad Hynes
& Lerach, 523 U.S. 26, 37, 118 S.Ct. 956, 140 L.Ed.2d 62 ("To be sure ...
the Panel is not meant to issue ceremonial remand orders in cases already
concluded by summary judgment, say, or dismissal.").
IT IS SO ORDERED.
Bose v. Interclick, Inc.
Not Reported in F.Supp.2d, 2011 WL 4343517 (S.D.N.Y. 2011)
MEMORANDUM AND ORDER
DEBORAH A. BATTS, District Judge.
Plaintiff Sonal Bose (“Bose”), individually and on behalf of all others
similarly situated, brings suit against Defendant Interclick, Inc. (“Interclick”),
an Advertising Network company, and McDonald's USA LLC, McDonald's
Corp., CBS Corp., Mazda Motor Corp. of America, Inc., Microsoft Corp., and
Does 1–50 (collectively, the “Advertiser Defendants”) under the Computer
Fraud and Abuse Act (“CFAA”), New York General Business Law Section 349,
and New York State common law. All Defendants move to dismiss on the
grounds that Plaintiff fails to allege cognizable injury or meet the $5,000.00
threshold to state a claim under the CFAA, and that Plaintiff's state law
claims fail as a matter of law. For the reasons below, Defendants' Motions to
Dismiss are GRANTED in part and DENIED in part.
I. BACKGROUND
126
The facts and allegations are set forth in Bose's Amended Complaint
(“Am.Compl.”). Bose's factual assertions are assumed true for the purposes
of this motion.
Bose is a resident of the city, county, and state of New York.
(Am.Compl.¶ 7.) Bose is a consumer who frequently uses the Internet. (Id.
¶ 76.)
Interclick is an “Advertising Network” company. (Id. ¶¶ 8, 24.) Interclick
purchases advertisement display space from websites, and displays
advertisements of interest to a computer user. (Id. ¶ 30.) Websites on the
Internet frequently display third-party advertisements. (Id. 130.) These
websites sell advertising display space either directly to advertisers or to
Advertising Network companies like Interclick. (Id. ¶¶ 24–25.) Interclick's
clients are advertising companies and agencies that pay fees to Interclick to
display their advertisements on websites within Interclick's advertising
network. (Id. ¶¶ 21, 24.)
Many Advertising Network companies use “browser cookies,” which are
text files that gather information about a computer user's internet habits.
(Am.Compl.¶ 30.) Browser cookies contain unique identifiers and associate
“browsing history information” with particular computers. (Id. ¶ 30.)
Advertising Networks use this browsing history information to create
“behavioral profiles.” When a computer user visits a web page on which the
Advertising Network provides advertisements, the Advertising Network
company uses a behavioral profile to select particular advertisements to
display on that computer. (Id. ¶ 30.) Computer users can delete these
browser cookies to prevent third parties from associating the user's browsing
history information with their subsequent web activity. (Id. ¶¶ 32, 82.)
Bose, however, alleges that Interclick used “flash cookies” (or Local
Shared Objects (“LSOs”)) to back up browser cookies. (Am.Compl.¶ 39.)
When a computer user deletes a browser cookie, the flash cookie “respawns”
the browser cookie without notice to or consent of the user. (Id. ¶ 39.) The
flash cookie “may be” larger than a browser cookie. (Id. ¶ 88.) In October
2010, Bose examined her computer and found a flash cookie placed there
from Interclick. (Id. ¶ 77.)
Bose also alleges that Interclick used “history sniffing” code invisible to
the computer user. (Am.Compl.¶ 47.) This code, which contained a list of
Web page hyperlinks, used the computer's browser to determine whether
the computer had previously visited those hyperlinks, and transmitted the
results to Interclick's servers. (Id. ¶ 47.) Interclick used data on the
computer's browsing history to select particular advertisements to display on
that computer. (Id. ¶ 47.)
On December 8, 2010, Bose filed suit against Interclick. A suit against the
Advertiser Defendants followed on December 23, 2010, and those cases
were consolidated with the filing of the First Amended Complaint on March
21, 2011. Plaintiff alleges that Interclick violated the CFAA by monitoring
127
Plaintiff's web browsing. (Id. ¶ 1.) Bose alleges that the Defendants invaded
her privacy, misappropriated personal information, and interfered with the
operation of her computer. (Id. ¶ 3.) On April 18, 2011, all Defendants
moved to dismiss for failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6).
II. DISCUSSION
****
B. The Computer Fraud and Abuse Act
The CFAA provides, in pertinent part, “[w]hoever intentionally accesses a
computer without authorization or exceeds authorized access, and thereby
obtains information from any protected computer ... shall be punished.” 18
U.S.C. § 1030(a)(2)(C). Under § 1030(a)(5)(C), the CFAA also subjects to
criminal liability someone who “intentionally accesses a protected computer
without authorization, and as a result of such conduct, causes damage.”
Although the CFAA is a criminal statute, it also provides a civil remedy.
Under the civil enforcement provision of the CFAA, “[a]ny person who suffers
damage or loss by reason of a violation of this section may maintain a civil
action against the violator to obtain compensatory damages and injunctive
relief or other equitable relief .” 18 U.S.C. § 1030(g); see also Nexans Wires
S.A. v. Sark–USA, Inc., 166 Fed. App'x 559, 562 (2d Cir. Feb.13, 2006)
(recognizing that a Plaintiff can only bring a civil action if the Plaintiff
satisfies one of five factors set forth in § 1030(c)(4)(A)(i)9). The relevant
9
The five factors set forth in 18 U.S.C. § 1030(c)(4)(A)(i) are:
(I) loss to 1 or more persons during any 1–year period (and, for
purposes of an investigation, prosecution, or other proceeding
brought by the United States only, loss resulting from a related
course of conduct affecting 1 or more other protected computers)
aggregating at least $5,000.00 in value;
(II) the modification or impairment, or potential modification or
impairment, of the medical examination, diagnosis, treatment, or
care of 1 or more individuals;
(III) physical injury to any person;
(IV) a threat to public health or safety; and
(V) damage affecting a computer used by or for an entity of the
United States Government in furtherance of the administration of
justice, national defense, or national security.
128
factor in this case is whether Defendants' conduct caused “loss to 1 or more
persons during any 1–year period ... aggregating at least $5,000 in value.” §
1030(c)(4)(A) (i)(I).
1. Damage or Loss under the CFAA
The CFAA defines “damage” as “any impairment to the integrity or
availability of data, a program, a system, or information.” § 1030(e)(8).
“Loss,” in turn, includes “any reasonable cost to any victim, including the
cost of responding to an offense, conducting a damage assessment, and
restoring the data, program, system, or information to its condition prior to
the offense, and any revenue lost, cost incurred, or other consequential
damages incurred because of interruption of service.” § 1030(e)(11). In
addition, any damage or loss must meet the $5,000.00 minimum statutory
threshold specified in § 1030(c)(4)(A)(i)(I). Register.com, Inc. v. Verio, 356
F.3d 393, 439 (2d Cir.2004) (citing In re Double C lick Inc. Privacy Litiq.,
154 F.Supp.2d 497, 520–23 (S.D.N.Y.2001)).
Here, Bose pleads three types of damage or loss: (1) damage due to
impairment of Bose's computer and computer-related services and
resources; (2) loss due to Interdict's collection of personal information from
Bose; and (3) loss due to an interruption of Bose's Internet service.
(Am.Compl.¶¶ 94–116.)
a. Damage to Computer–Related Resources
With regard to damage or impairment of a computer system, physical
damage to a computer is not necessary to allege damage or loss. EF Cultural
Travel BV v. Explorica, Inc., 274 F.3d 577, 585 (1st Cir.2001) (noting that
instances of physical damage to computers are likely to become less
common while the value and cost of maintaining computer security are
increasing); see also Tyco Int'l (US) Inc. v. John Does 1–3, No. 01 Civ.
3856, 2003 WL 21638205, at *1 (S.D.N.Y. July 11, 2003). Any loss incurred
from “securing or remedying” a computer system after an alleged CFAA
violation still constitutes loss. In re Double Click Inc. Privacy Litig., 154
F.Supp.2d 497, 524 (S.D.N.Y.2001) ( “S.Rep. No. 104–357 seems to make
clear that Congress intended the term ‘loss' to target remedial expenses
borne by victims that could not properly be considered direct damage caused
by a computer hacker.”). Accordingly, Courts have sustained claims where a
Defendant accessed a Plaintiff's computer system in order to copy the
Plaintiff's system for the Defendant's own competitor computer system.
I.M.S. Inquiry Mgmt. Sys., Ltd. v. Berkshire Info., 307 F.Supp.2d 521, 525
(S.D.N.Y.2004) (finding that harm to the integrity of plaintiff's data system
constitutes loss).
Courts have found that losses include the costs of seeking to “identify
129
evidence of the breach, assess any damage it may have caused, and
determine whether any remedial measures were needed to rescue the
network.” Univ. Sports Pub. Co. v. Playmakers Media Co., 725 F.Supp.2d
378, 388 (S.D.N.Y.2010); see also Ipreo Holdings LLC v. Thomson Reuters
Corp., No. 09 CV 8099(BSJ), 2011 WL 855872, *7 (S.D.N.Y. Mar.8, 2011)
(holding that a Plaintiff can meet the loss requirement through “damage
assessment and/or remedial measures, even without pleading actual
damage”); Kaufman v. Nest Seekers, LLC, No. 05 CV 6782(GBD), 2006 WL
2807177, at *8 (S.D.N.Y. Sept.26, 2006) (denying motion to dismiss
because “costs involved in investigating the damage to [a] computer system
may constitute ... loss”); see also I.M.S. Inquiry Mgmt. Sys., Ltd., 307
F.Supp.2d 521 at 526 (holding that a Plaintiff sufficiently alleged loss where
Defendant's unauthorized activity “forced Plaintiff to incur costs of more than
$5,000 in damage assessment and remedial measures”).
Here, Bose fails to quantify any damage that Interclick caused to her
“computers, systems or data that could require economic remedy.” See In re
DoubleClick Inc. Privacy Litig., 154 F.Supp.2d at 521. Bose alleges that
Interclick impaired the functioning and diminished the value of Bose's
computer in a general fashion (See Am. Compl. ¶ 115), but fails to make
any specific allegation as to the cost of repairing or investigating the alleged
damage to her computer. See Fink v. Time Warner Cable, No. 08 Civ.
9628(LTS)(KNF), 2009 WL 2207920, *4 (S.D.N.Y. July 23, 2009) (dismissing
a CFAA claim because Plaintiff only alleged that Defendant caused damage
by “impairing the integrity or availability of data and information,” which was
“insufficiently factual to frame plausibly the damages element of Plaintiff's
CFAA claim”); see also Czech v. Wall St. on Demand, Inc., 674 F.Supp.2d
1102, 1118 (D.Minn.2009) (holding that a Plaintiff's claim that unwanted
text messages “caused the wireless devices of [Plaintiff] to slow and/or lag
in operation” and “impair[ ] the availability of and interrupt[ ] the wirelessdevice service,” was conclusory). Bose's claims therefore fail because she
does not quantify the repair cost or cost associated with investigating the
alleged damage.
b. Collection of Personal Information
Bose's allegations concerning “invasion of [her] privacy,” “trespass,” and
“misappropriation of confidential data” are also not cognizable economic
losses. See In re Double C lick Inc. Privacy Litig., 154 F.Supp.2d at 524 n.
33; see also S. Rep No. 101–544 (1990) (noting that the CFAA is limited to
“economic damages,” except for violations related to medical records).
Only economic damages or loss can be used to meet the $5,000.00
threshold. In re DoubleClick Inc. Privacy Litig., 154 F.Supp.2d at 519
(holding that computer users' demographic information were not
compensable “economic damages”); see also Civic Ctr. Motors, Ltd. v. Mason
St. Imp. Cars, Ltd., 387 F.Supp.2d 378, 382 (S.D.N.Y.2005) (holding that
130
lost profits from defendant's unfair competitive edge were not economic
damages under the CFAA). The limit based on economic damages under the
CFAA “precludes damages for death, personal injury, mental distress, and
the like.” Creative Computing v. Getloaded.com LLC, 386 F.3d 930, 935 (9th
Cir.2004).
Here, Bose alleges loss from Interclick's collection of her personal
information without her permission through flash cookies and history sniffing
code. (Am.Compl.¶¶ 94–109.) Unlike in DoubleClick, where Plaintiffs could
“easily and at no cost prevent [the Defendant] from collecting information by
simply selecting options on their browsers or downloading an ‘opt out’
cookie,” Bose alleges that Interclick circumvented “browser privacy controls”
without her consent. (Am.Compl.¶ 79); see 154 F.Supp.2d at 521.
This Court is not persuaded by Plaintiff's attempt to distinguish
DoubleClick. In LaCourt v. Specific Media, Inc., a court in the Central District
of California dismissed a CFAA claim by plaintiffs who alleged that they set
“privacy and security controls” on their computers to block and delete third
party cookies, and that the defendant had a “Flash cookie” installed on
plaintiffs' computers without notice or consent. See LaCourt v. Specific
Media, Inc., No. SACV 10–1256–GW(JCGx), 2011 WL 1661532, at *1
(C.D.Cal. Apr. 28, 2011). Finding that plaintiffs had failed to allege economic
injury, the court noted,
the Complaint does not identify a single individual who was foreclosed from
entering into a ‘value-for-value exchange’ as a result of [defendant's]
alleged conduct. Furthermore, there are no facts in the [complaint] that
indicate that the Plaintiffs themselves ascribed an economic value to their
unspecified personal information. Finally, even assuming an opportunity to
engage in a ‘value-for-value exchange,’ Plaintiffs do not explain how they
were ‘deprived’ of the economic value of their personal information simply
because their unspecified personal information was purportedly collected
by a third party.
LaCourt, 2011 WL 1661532, at *5.
The deficiencies noted by the court in LaCourt are also present here.
Furthermore, as noted by the court in DoubleClick, personal data and
demographic information concerning consumers are constantly collected by
marketers, mail-order catalogues and retailers. In re DoubleClick Inc.
Privacy Litiq., 154 F.Supp.2d at 525. The collection of demographic
information does not “constitute[ ] damage to consumers or unjust
enrichment to collectors.” Id. Advertising on the Internet is no different from
advertising on television or in newspapers. Id. Even if Bose took steps to
prevent the data collection, her injury is still insufficient to meet the
statutory threshold. See LaCourt, 2011 WL 1661532, at *5 (holding that a
131
Plaintiff's inability to delete or control cookies may constitute de minimis
injury, but such injury was still insufficient to meet the $5,000.00
threshold).
The court's reasoning in DoubleClick is still persuasive, as the court
concluded in LaCourt:
While Plaintiffs attempt to distinguish DoubleClick on the ground they have
alleged that they were deprived not of “mere demographic information,”
but “of the value of their personal data,” it is not clear what they mean by
this. Defendant observes that, if anything, the Plaintiffs in DoubleClick
alleged that the Defendant collected much more information than Specific
Media supposedly collected in this case, including “names, e-mail
addresses, home and business addresses, telephone numbers, searches
performed on the Internet, Web pages or sites visited on the Internet and
other communications and information that users would not ordinarily
expect advertisers to be able to collect.”
Id. (citing In re Double C lick Inc. Privacy Litig., 154 F.Supp.2d at 503).
Bose's claim that Interclick collected her personal information therefore
does not constitute cognizable loss sufficient to meet the $5,000.00
statutory threshold.
c. Interruption of Service.
Bose also fails to allege specific damage or loss incurred due to alleged
interruption of service, or costs incurred to remedy the alleged interruption
of service. (Am.Compl.¶ 111–116.) Even if a flash cookie may reach up to
100 kilobytes in size and may occupy space on Bose's hard drive, Bose fails
to demonstrate that the flash cookie caused damage, a slowdown, or a
shutdown to her computer. See Czech, 674 F.Supp.2d at 1117 (holding that
damage caused by an “impairment of performance” of a cell phone occurs
only when the “cumulative impact of all calls or messages at any given time
exceeds the device's finite capacity so as to result in a slowdown, if not an
outright ‘shutdown,’ of service”). Thus, Bose's claim of interruption of service
is insufficient to meet the $5,000.00 statutory threshold for loss.
2. Aggregation
Bose alleges that when her claims and other class members' claims are
aggregated, the $5,000.00 threshold is met. (Am.Compl.¶¶ 120, 150.)
The Second Circuit has not yet addressed whether losses can be
aggregated for purposes of the CFAA before a class is certified, but it has
indicated approval of DoubleClick 's thorough exploration of the CFAA.
Register.com, Inc., 356 F.3d at 439–440 (noting in DoubleClick “excellent
statutory construction analysis and thorough exploration of legislative
history”). In DoubleClick, the court concluded that damage and loss may
only be “aggregated across victims and over time” for a “single act.” 154
132
F.Supp.2d at 523 (declining to aggregate claims that defendant placed
cookies on multiple computers and noting that the CFAA defines damage in §
1030(e)(8) in the singular form, “any impairment to the integrity or
availability of data, a program, a system, or information,” rather than the
plural form, “any impairments to the integrity or availability of data,
programs, systems, or information”); see also S.Rep. No. 99–132, at 5
(1986) (explaining that loss caused by the “same act” can be aggregated to
meet the $5,000.00 threshold). Plaintiff's claims that Interclick placed
cookies on multiple computers could not be aggregated to reach the
$5,000.00 threshold under the reasoning in DoubleClick.
Moreover, even if a plaintiff represents a class, she must still demonstrate
that she herself has been personally injured. Lewis v. Casey, 518 U.S. 343,
357, 116 S.Ct. 2174, 135 L.Ed.2d 606 (1996); see also In re America
Online, Inc., 168 F.Supp.2d 1359, 1374–75 (S.D.Fla.2001) (dismissing a
CFAA claim even if damages can be aggregated across multiple computers
because Plaintiff failed to specify individuals who suffered the loss, whether
they were individuals within the class, outside the class or named
representatives).
Some courts in the Ninth Circuit have concluded that damages can be
aggregated across multiple computers. The court in In re Toys R Us, Inc.,
Privacy Litig., explained aggregation: “Certain types of malicious mischief
may cause smaller amounts of damage to numerous individuals, and thereby
collectively create a loss of more than $1,000.” No. 00 Civ. 2746, 2001 WL
34517252, at *11 n. 20 (N.D.Cal. Oct.9, 2001) (quoting Sen. Rep. No. 99–
132). The court concluded that because the committee referred to
“numerous individuals,” damages across multiple computers could be
aggregated. Id. (holding that when “Defendants caused an identical file to be
implanted in each of the Plaintiffs' computers, resulting in damages of a
uniform nature,” Plaintiffs could aggregate “damages exceeding $5,000
during any one-year period to one or more individuals”). Under this
reasoning, multiple intrusions across a one-year period can cause a single
impairment to data, and the statute does not limit impairment to the result
of a single intrusion or a single corrupted byte. Creative Computing, 386
F.3d at 934–35.
Nevertheless, courts within the Ninth Circuit to have considered the
question subsequently have raised doubts concerning whether even after
aggregation, Plaintiffs can meet the $5,000.00 threshold when they allege
damages similar to those alleged in this case. See LaCourt, 2011 WL
1661532, *6 (finding that Plaintiffs “failed to plausibly allege that they and
the putative class—even in the aggregate—have suffered $5,000 in
economic damages in a one year period as a result of [the Defendant's]
actions”). As in LaCourt, Plaintiff here has failed to allege facts that would
allow this Court to conclude that damages meet the $5,000.00 threshold,
even when aggregated across the putative class.
133
Accordingly, Bose's Amended Complaint must be dismissed because she
failed to assert personal economic loss under the CFAA.
C. State Law Claims
Plaintiff claims that this Court has jurisdiction over the remaining state
law claims under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332
(hereinafter, “CAFA”), because the aggregate claims of Plaintiff and the
proposed Class exceed $5,000,000.00, there is minimal diversity of
citizenship between Defendants and the proposed Class, and the Classes
each consist of more than one hundred members. (Am.Compl.¶ 16.)
Defendants move to dismiss the state law claims on the grounds that
Plaintiff has failed to meet the $5,000,000.00 threshold, and that Plaintiff
has failed to state a claim under the relevant state laws.
As an initial matter, this Court notes that Plaintiff's failure to meet the
$5,000.00 threshold under the CFAA is not, as Defendants argue,
necessarily fatal to Bose's attempt to assert CAFA jurisdiction over her state
law claims. Damages under the CFAA are narrowly defined, and Plaintiff and
the Class Members may be entitled to damages under state law that are not
cognizable under the CFAA. This Court must therefore address Plaintiff's
state law claims.
i. New York General Business Law § 349
Plaintiff alleges that Defendants' information collecting activities
constitute a deceptive business act or practice under Section 349 of the New
York General Business law. (Am.Compl.¶ 155.) Section 349 was originally
enacted as a broad consumer protection measure. See Stutman v. Chemical
Bank, 95 N.Y.2d 24, 28, 709 N.Y.S.2d 892, 731 N.E.2d 608 (N.Y.2000); N.Y.
Gen. Bus. Law. § 349 (McKinney 2011). To state a claim under Section 349,
a plaintiff must demonstrate three elements: “first, that the challenged act
or practice was consumer-oriented; second, that it was misleading in a
material way; and third, that the plaintiff suffered injury as a result of the
deceptive act.” Id. at 29, 709 N.Y.S.2d 892, 731 N.E.2d 608; see also
Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d
20, 25, 623 N.Y.S.2d 529, 647 N.E.2d 741 (N.Y.1995). The deceptive
practice must be “likely to mislead a reasonable consumer acting reasonably
under the circumstances.” Oswego, 85 N.Y.2d at 26, 623 N.Y.S.2d 529, 647
N.E.2d 741. “The phrase deceptive acts or practices” under the statute is not
the mere invention of a scheme or marketing strategy, but the actual
misrepresentation or omission to a consumer.” Goshen v. Mutual Life Ins.
Co. of N.Y., 98 N.Y.2d 314, 325, 746 N.Y.S.2d 858, 774 N.E.2d 1190
(N.Y.2002). In addition, a plaintiff must prove “actual” injury to recover
under the statute, though not necessarily pecuniary harm. Oswego, 85
N.Y.2d at 26, 623 N.Y.S.2d 529, 647 N.E.2d 741.
Plaintiff alleges that Defendant Interclick used LSOs and browser history
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sniffing code to circumvent consumers' ordinary browser privacy and
security settings on their computers. (Am.Compl.¶ 156.) This conduct misled
consumers into believing their digital information was private when in reality
it was being tracked without their knowledge. (Am.Compl.¶ 157.) Plaintiff
alleges that consumers were harmed in that they suffered “the loss of
privacy through the exposure of the [sic] personal and private information
and evasion of privacy controls on their computers.” (Am.Compl.¶ 160.)
Interclick first argues that Plaintiff cannot meet the second element of a
claim under Section 349 because Plaintiff has failed to allege misleading
conduct on the part of Interclick. Interclick argues that as Plaintiff was
unaware of Interclick's actions while they were occurring, Plaintiff could not
have been misled into entering into any consumer transaction. (Interclick
Mem. L., p. 18.) Interclick would thus have this Court interpose a reliance
element into the Section 349 analysis. The New York Court of Appeals has
specifically rejected that proposition. See Stutman, 95 N.Y.2d at 30, 709
N.Y.S.2d 892, 731 N.E.2d 608 (“Plaintiffs need not additionally allege that
they would not otherwise have entered into the transaction.”)
In its reply papers, Interclick modifies its argument slightly, contending
that Plaintiff fails to allege any misrepresentation or omission by Interclick to
Plaintiff. (Interclick Rep. Mem. L., at 8 .) Although the paradigmatic case
under Section 349 involves a business making a false or misleading
statement in advertising aimed at consumers, see, e.g., Waldman v. New
Chapter, Inc., 714 F.Supp.2d 398, 405 (E.D.N.Y.2010), courts have allowed
claims under Section 349 where misleading statements are made to third
parties resulting in harm to consumers. See Securitron Magnalock Corp. v.
Schnabolk, 65 F.3d 256, 264 (2d Cir.1995) (finding false statements by a
competitor to a regulatory agency actionable under Section 349); Kuklachev
v. Gelfman, 600 F.Supp.2d 437, 476 (E.D.N.Y.2009) (“The relevant question
‘is whether the matter affects the public interest in New York, not whether
the suit is brought by a consumer.’ ”) (quoting Securitron, 65 F.3d at 257).
A claim under Section 349 need not, as Interclick argues, involve an
allegation of a deceptive statement made by Interclick to Plaintiff. It need
only allege that Interclick engaged in a deceptive practice that affected the
consuming public. Plaintiff has alleged as much.
Interclick next claims that Plaintiff has failed to allege any injury as a
result of any misleading act or omission. To state a claim under Section 349,
a plaintiff must allege “actual” injury, though not necessarily pecuniary
injury. Stutman, 95 N.Y.2d at 29, 709 N.Y.S.2d 892, 731 N.E.2d 608.
Although collection of personal information does not constitute “economic”
injury for purposes of the CFAA, courts have recognized similar privacy
violations as injuries for purposes of Section 349. See Meyerson v. Prime
Realty Services, LLC, 7 Misc.3d 911, 920, 796 N.Y.S.2d 848
(N.Y.Sup.Ct.2005) (“[I]t cannot be doubted that a privacy invasion claim—
and an accompanying request for attorney's fees-may be stated under
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[Section] 349 based on nonpecuniary injury ...”); Anonymous v. CVS Corp.,
728 N.Y.2d 333, 340 (N.Y.Sup.Ct.2001) (allowing Section 349 claim for
violation of privacy when local pharmacy transferred prescription records to
a national chain without advance notice to consumers).
Plaintiff has therefore adequately pled a claim under Section 349 with
respect to Defendant Interclick. Nevertheless, Plaintiff has not alleged any
facts demonstrating that the Advertiser Defendants were involved in any of
the allegedly deceptive conduct. Therefore, Defendant Interclick's Motion to
Dismiss as to Plaintiff's Section 349 claim is DENIED, and the Advertiser
Defendants' Motion to Dismiss the Section 349 claim is GRANTED.
ii. Trespass to Chattels
Plaintiff appears to allege two potential grounds for a trespass to chattels
claim: first, that Defendants' have dispossessed Plaintiff and the other Class
Members of the economic value of their personal information, and second,
that Defendants' impaired the value of Plaintiff's and the other Class
Members' computers by installing Flash LSOs and browser history sniffing
code on those computers. (Am.Compl.¶¶ 168–170.)
A trespass to chattels occurs when a party intentionally, and without
justification or consent, physically interferes with the use and enjoyment of
personal property in another's possession, and thereby harms that personal
property. In re JetBlue Airways Corp. Litig., 379 F.Supp.2d 299, 327
(E.D.N.Y.2005); see also Register.com, Inc. v. Verio, Inc., 356 F.3d 393,
404 (2d Cir.2004). Nevertheless, “one who intentionally interferes with
another's chattel is liable only if the interference results in harm to ‘the
[owner's] materially valuable interest in the physical condition, quality, or
value of the chattel, or if the [owner] is deprived of the use of the chattel for
a substantial time.’ “ School of Visual Arts v. Kuprewicz, 3 Misc.3d 278, 771
N.Y.S.2d 804, 807–08 (N .Y.Sup.Ct.2003) (citing Restatement 2d of Torts §
218, Comment e .)
Although Plaintiff's claim that she was dispossessed of the economic value
of her personal information is of dubious merit, see discussion of CFAA
claim, supra; JetBlue, 379 F.Supp.2d at 328–329, Plaintiff's trespass to
chattels claim regarding Interclick's placement of unauthorized Flash LSOs
and history-sniffing code, considering there is no allegation that the devices
materially affected the condition, quality, or value of the computer, is
arguably sufficient to survive a motion to dismiss. School of Visual Arts v.
Kuprewicz, 3 Misc.3d 278, 771 N.Y.S.2d 804, 808 (N.Y.Sup.Ct.2003)
(sustaining trespass to chattels claim where plaintiff alleged that unsolicited
emails “deplete hard disk space, drained processing power, and adversely
affected other system resources”).
Plaintiff's claim with respect to Interclick thus survives. Again, however,
Plaintiff has not alleged any facts indicating that the Advertiser Defendants
committed a trespass. Accordingly, Defendant Interclick's Motion to Dismiss
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as to Plaintiff's trespass to chattels claim is DENIED, and the Advertiser
Defendants' Motion to Dismiss the trespass to chattels claim is GRANTED.
iii. Breach of Implied Contract
In order to recover for breach of implied contract or quasi-contract under
New York law, a plaintiff must establish: “(1) the performance of services in
good faith, (2) the acceptance of the services by the person to whom they
are rendered, (3) an expectation of compensation therefore, and (4) the
reasonable value of the services.” Mid–Hudson Catskill Rural Migrant
Ministry, Inc. v. Fine Host Corp., 418 F.3d 168, 175 (2d Cir.2005) (internal
quotations and citations omitted).
Plaintiff describes the implied contractual relationship as follows: “Plaintiff
and Class Members provided their personal information in good faith to
websites (publishers), reasonably expected that such information would be
exchanged with the advertisers and that Plaintiff and Class Members would
in turn receive the goods and services offered by such websites” [sic].
(Am.Compl. ¶ 183.) Under this theory of implied contract, Plaintiff fails to
allege that this bargain was unfulfilled in any way. She does not allege that
she or the Class Members were denied the benefit for which they had
“bargained,” i.e., receiving the goods and services offered by the websites to
whom they offered their personal information.
Therefore, Defendants' 12(b)(6) Motions to Dismiss Plaintiff's breach of
implied contract claim are GRANTED.
iv. Tortious Interference with Contract
Plaintiff further alleges that when she visited websites on which Interclick
operated, she entered into agreements with the operators of those websites,
including privacy policies and terms of service. Plaintiff alleges that
Defendants' activities were in conflict with the privacy policies and caused
the websites to breach those policies, therefore constituting a tortious
interference with contract.
The elements of a tortious interference claim are: (1) that a valid contract
exists; (2) that a “third party” had knowledge of the contract; (3) that the
third party intentionally and improperly procured the breach of the contract;
and (4) that the breach resulted in damage to the plaintiff. See TVT Records
v. Island Def Jam Music Group, 412 F.3d 82, 88 (2d Cir.2005); Finley v.
Giacobbe, 79 F.3d 1285, 1294 (2d Cir.1996).
Plaintiff has not stated a claim for tortious interference with contract
because she has not alleged any facts regarding the nature of the privacy
agreements that she had with any of the websites. Furthermore, Plaintiff
does not specify any individual contract that was breached, but just claims
generally that Plaintiff had contracts with various website operators which
were all breached. (Am.Compl.¶ 194.) Plaintiff's allegations are far too
general to state a claim for tortious interference with contract, because
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without facts regarding the terms of the contracts or the specific parties to
the contracts, it cannot be determined if a contract indeed existed or if
Defendants' activities procured a breach of those contracts.
Therefore, Defendants' 12(b)(6) Motions to Dismiss as to Plaintiff's
tortious interference with contract claim are GRANTED.
D. Leave to Replead
When a complaint has been dismissed, permission to amend it “shall be
freely given when justice so requires.” Fed.R.Civ.P. 15(a). However, a court
may dismiss without leave to amend when amendment would be “futile,” or
would not survive a motion to dismiss. Gatt Communications, Inc. v. PMC
Associates, 10–CV–8, 2011 WL 1044898 at *7 (S.D.N.Y. Mar.10, 2011)
(citing Oneida Indian Nation of N.Y. v. City of Sherrill, 337 F.3d 139, 168 (2d
Cir.2003).
Here, Plaintiff has alleged no specific interaction with any of the
Advertiser Defendants, nor has she alleged any knowledge or active
participation by the Advertiser Defendants in Interclick's alleged
unauthorized access to the computers of Plaintiff and the Class Members.
Plaintiff's claims against the Advertiser Defendant are futile and would not
survive a motion to dismiss. Those claims are therefore dismissed, with
prejudice.
Furthermore, as Plaintiff cannot meet the requisite statutory threshold
under CFAA or state the necessary contractual relationships for a Breach of
Implied Contract or Tortious Interference with Contract claim, those claims
are dismissed, with prejudice.
III. CONCLUSION
For the above reasons, the Advertiser Defendants' Motion to Dismiss is
GRANTED and Plaintiff's claims against McDonald's Corporation, CBS
Corporation, Mazda Motor of America, Inc., Microsoft Corporation, and
McDonald's USA, LLC, are dismissed with prejudice;
Interclick's Motion to Dismiss is GRANTED with respect to Plaintiff's CFAA
claim. Plaintiff's Breach of Implied Contract Claim, and Plaintiff's Tortious
Interference with Contract claim, and those claims are dismissed with
prejudice;
Interclick's Motion to Dismiss is DENIED with respect to Plaintiff's claim
under New York General Business Law Section 349, and Plaintiff's Trespass
to Chattels claim; and
Defendant Interclick shall answer the remaining claims within 30 days of
the date of this Order.
SO ORDERED.
Dougherty v. Salt
138
125 N.E. 94 (1919)
Cardozo, J.
The plaintiff, a boy of eight years, received from his aunt, the defendant's
testatrix, a promissory note for $3,000, payable at her death or before. Use was
made of a printed form, which contains the words ‘value received.’ How the note
came to be given was explained by the boy's guardian, who was a witness for his
ward. The aunt was visiting her nephew.
‘When she saw Charley coming in, she said, ‘Isn't he a nice boy?’ I answered
her, Yes; that he is getting along very nice, and getting along nice in school; and I
showed where he had progressed in school, having good reports, and so forth, and
she told me that she was going to take care of that child; that she loved him very
much. I said, ‘I know you do, Tillie, but your taking care of the child will be done
probably like your brother and sister done, take it out in talk. ’She said, ‘I don't
intend to take it out in talk; I would like to take care of him now. ’I said, ‘Well, that
is up to you.’ She said, ‘Why can't I make out a note to him? ’I said, ‘You can, if
you wish to.’ She said, ‘Would that be right?’ And I said, ‘I do not know, but I guess
it would; I do not know why it would not.’ And she said, ‘Well, will you make out a
note for me?’ I said, ‘Yes, if you wish me to,’ and she said, ‘Well, I wish you would.”
Did Aunt Tillie intend to make a legally binding promise to Charley?
(a) Yes
(b) No
A blank was then produced, filled out, and signed. The aunt handed the note
to her nephew, with these words:
‘You have always done for me, and I have signed this note for you. Now, do
not lose it. Some day it will be valuable.’
The trial judge submitted to the jury the question whether there was any
consideration for the promised payment. Afterwards, he set aside the verdict in
favor of the plaintiff, and dismissed the complaint. The Appellate Division, by a
divided court, reversed the judgment of dismissal, and reinstated the verdict on the
ground that the note was sufficient evidence of consideration.
We reach a different conclusion. The inference of consideration to be drawn
from the form of the note has been so overcome and rebutted as to leave no
question for a jury. This is not a case where witnesses, summoned by the
defendant and friendly to the defendant's cause, supply the testimony in disproof of
value. Strickland v. Henry, 175 N. Y. 372, 67 N. E. 611. This is a case where the
testimony in disproof of value comes from the plaintiff's own witness, speaking at
the plaintiff's instance. The transaction thus revealed admits of one interpretation,
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and one only. The note was the voluntary and unenforceable promise of an
executory gift. Harris v. Clark, 3 N. Y. 93, 51 Am. Dec. 352; Holmes v. Roper, 141
N. Y. 64, 66,36 N. E. 180. This child of eight was not a creditor, nor dealt with as
one. The aunt was not paying a debt. She was conferring a bounty. Fink v. Cox,
18 Johns. 145, 9 Am. Dec. 191.
If Aunt Tillie had been making a promise to pay a debt, she would have
(a) been making the promise in return for value received.
(b) not have been making the promise in return for value received.
The promise was neither offered nor accepted with any other purpose. . . . A note
so given is not made for ‘value received,’ however its maker may have labeled it.
The formula of the printed blank becomes, in the light of the conceded facts, a
mere erroneous conclusion, which cannot overcome the inconsistent conclusion of
the law. . . . The plaintiff through his own witness, has explained the genesis of
the promise, and consideration has been disproved. Neg. Instr. Law, § 54 (Consol.
Laws, c. 38).
We hold, therefore, that the verdict of the jury was contrary to law, and that the
trial judge was right in setting it aside. . . .
The court requires that Aunt Tillie’s promise to pay the money be given in exchange
for value received. Thus, without such an exchange, the fact that Aunt Tillie
intended the promise to be legally enforceable is irrelevant to the question of
whether the promise is in fact legally enforceable.
(a) True
(b) False
The judgment of the Appellate Division should be reversed, and the judgment
of the Trial Term modified by granting a new trial, and, as modified, affirmed, with
costs in all courts to abide the event.
United States District Court, D. Nevada
In Re Zappos.Com, Inc., Customer Data Security Breach Litigation,
Order
R. JONES, District Judge
3:12-CV-00325-RCJ-VPC
September 27, 2012.
140
This Multidistrict Litigation ("MDL") proceeding arises out of a security breach of
servers belong to Defendants Amazon.com, Inc. zon")[fn1] , doing business as
Zappos.com, and Zappos.com, Inc. ("Ama: ("Zappos") in January 2012. Now
pending is Defendant Zappos' Motion to Compel Arbitration and Stay action (#3).
I. Relevant Factual Background
Zappos is an online retailer of apparel, shoes, handbags, home furnishing, beauty
products, and accessories. (Rajan Decl. ¶ 3 (#3-1).) Plaintiffs are Zappos
customers who gave personal information to Zappos in order to purchase goods via
Zappos.com and/or 6PM.com. (Id. ¶¶ 4-7; Rajan Second Supp'l Decl. ¶ 3-13 (#131).) In mid-January 2012, a computer hacker attacked Zappos.com and attempted
to download files containing customer information such as names and addresses
from a Zappos server (the "Security Breach"). (Defs.' Mot. Compel at 1 (#3); Pls.'
Opp'n at 4 (#10) .) Plaintiffs allege that on January 16, 2012, Zappos notified
Plaintiffs via email that their personal customer account information had been
compromised by hackers. (Def.'s Mot. Compel at 6 (#3); Steven Pls.' Opp'n at 1
(#9); Pls.' Opp'n at 4 (#10).) Plaintiffs have filed complaints in federal district
courts across the country seeking relief pursuant to state and federal statutory and
common law for damages resulting from the Security Breach.
II. Procedural Background
On June 14, 2012, the United States Judicial Panel on Multidistrict Litigation (the
"MDL Panel") transferred nine pending actions[fn2] to the District of Nevada for
coordinated or consolidated pretrial proceedings. (Transfer Order (#1).) On July 16,
2012, the MDL Panel transferred an additional case into this action.[fn3]
Also on June 14, 2012, Defendants' Motion to Compel Arbitration and Stay Action
(#3) was filed in this Court.[fn4] On August 30, 2012, Plaintiffs Theresa D.
Stevens, Stacy Penson, Tara J. Elliot, Brooke C. Brown, and Christa Seal (the
"Stevens Plaintiffs") filed their Opposition (#9). Plaintiffs Stephanie Priera, Patti
Hasner, Robert Ree, Shari Simon, and Kathryn Vorhoff (the "Priera Plaintiffs") also
filed their Opposition (#10) on August 30, 2012. Plaintiffs Dahlia Habashy and Josh
Richards each submitted their respective Joinder (##11, 12) to the Priera
Opposition (#10) on August 30, 2012. Defendants submitted a Joinder of Additional
Plaintiffs (#14) to their Motion to Compel Arbitration and Stay Action (#3) on
August 30, 2012. Defendants filed their Reply (#16) on September 6, 2012. The
Court held a hearing on the motion and heard the parties' oral arguments on
September 19, 2012.
III. Legal Standard
The Federal Arbitration Act ("FAA") provides that contractual arbitration agreements
"shall be valid, irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract." 9 U.S.C. § 2 . . .
IV. Discussion
141
The arbitration agreement at issue, founds in the Disputes section of the Terms of
Use of the Zappos.com website, provides as follows:
Any dispute relating in any way to your visit to the Site or to the products
you purchase through the Site shall be submitted to confidential arbitration in
Las Vegas, Nevada, except that to the extent you have in any manner
violated or threatened to violate our intellectual property rights, we may seek
injunctive or other appropriate relief in any state or federal court in the State
of Nevada. You hereby consent to, and waive all defense of lack of personal
jurisdiction and forum non conveniens with respect to venue and jurisdiction
in the state and federal courts of Nevada. Arbitration under these Terms of
Use shall be conducted pursuant to the Commercial Arbitration Rules then
prevailing at the American Arbitration Association. The arbitrator's award
shall be final and binding and may be entered as a judgment in any court of
competent jurisdiction. To the fullest extent permitted by applicable law, no
arbitration under this Agreement shall be joined to an arbitration involving
any other party subject to this Agreement, whether through class action
proceedings or otherwise. You agree that regardless of any statute or law to
the contrary, any claim or cause of action arising out of, related to or
connected with the use of the Site or this Agreement must be filed within one
(1) year after such claim or cause of action arose or be forever banned.
(Carton Decl. Ex. 8 (#10-16).) Additionally, the first paragraph of the Terms of Use
provides in relevant part: "We reserve the right to change this Site and these terms
and conditions at any time. ACCESSING, BROWSING OR OTHERWISE USING
THE SITE INDICATES YOUR AGREEMENT TOALL THE TERMS AND
CONDITIONS IN THIS AGREEMENT, SO PLEASE READ THISAGREEMENT
CAREFULLY BEFORE PROCEEDING." (Id. (emphasis in original).)
A. Plaintiffs Did Not Agree to the Terms of Use
The Court's first step when presented with a motion to compel arbitration is to
determine whether a valid agreement to arbitrate exists. Chiron Corp., 207 F.3d at
1130 .
It is undisputed that Zappos' Terms of Use constitutes what federal courts have
deigned a "browsewrap" agreement. With a browsewrap agreement, a website
owner seeks to bind website users to terms and conditions by posting the terms
somewhere on the website, usually accessible through a hyperlink located
somewhere on the website; in contrast, a "clickwrap" agreement requires users to
expressly manifest assent to the terms by, for example, clicking an "I accept"
button. Specht v. Netscape Commc'ns Corp., 306 F.3d 17 , 22 n.4 (2d Cir. 2002)
(J. Sotomayor). "Because no affirmative action is required by the website user to
agree to the terms of a contract other than his or her use of the website, the
determination of the validity of a browsewrap contract depends on whether the user
has actual or constructive knowledge of a website's terms and conditions." Van
Tassell v.United Mktcr. Grp., 795 F.Supp.2d 770 , 790 (N.D. 111. 2011) (citing
Pollstarv. Gigmania, Ltd., 170 F.Supp.2d.974, 981 (E.D. Cal. 2000)); see also Mark
A. Lemley, Terms of Use, 90 MINN. L. REV. 459, 477 (2006) ("Court may be willing
142
to overlook the utter absence of assent only when there are reasons to believe that
the [website user] is aware of the [website owner's] terms."); Note, Ticketmaster
Corp. v. Tickers.com, Inc.: Preserving-Minimum Requirements of Contract on the
Internet, 19 BERKELEY TECH. L.J. 495, 507 (2004) ("[S]o far courts have held
browsewrap agreements enforceable if the website provides sufficient notice of the
license."). Where, as here, there is no evidence that plaintiffs had actual knowledge
of the agreement, "the validity of a browsewrap contract hinges on whether the
website provides reasonable notice of the terms of the contract." Van Tassel, 795
F.Supp.2d at 791 (citing Specht, 306 F.3d at 32 ).
Here, the Terms of Use hyperlink can be found on every Zappos webpage, between
the middle and bottom of each page, visible if a user scrolls down. (Carton Decl. Ex.
1 (#10-9).) For example, when the Zappos.com homepage is printed to hard copy,
the link appears on page 3 of 4. (Id.) The link is the same size, font, and color as
most other non-significant links. (Id.) The website does not direct a user to the
Terms of Use when creating an account, logging in to an existing account, or
making a purchase. (Id.; Carton Decl. Ex. 2 (#10-10), Ex. 3 (#10-11), Ex. 4 (#1012)., Ex. 5 (#10-13); Ex. 6 (#10-14), Ex. 7 (#10-15).) Without direct evidence
that Plaintiffs click on the Terms of Use, we cannot conclude that Plaintiffs ever
viewed, let alone manifested assent to, the Terms of Use. The Terms of Use is
inconspicuous, buried in the middle to bottom of every Zappos.com webpage
among many other links, and the website never directs a user to the Terms of Use.
No reasonable user would have reason to click on the Terms of Use, even those
users who have alleged that they clicked and relied on statements found in adjacent
links, such as the site's "Privacy Policy." This case is therefore factually similar to
cases that have decline to enforce arbitration clauses, such as Hines v.
Overstock.com, wherein the Court refused to enforce an arbitration provision
because the plaintiff "lacked notice of the Terms and Conditions because the
website did not prompt her to review the Terms and Conditions and because the
link to the Terms and Conditions was not prominently displayed so as to provide
reasonable notice of the Terms and Conditions." 668 F.Supp.2d 362 , 367
(E.D.N.Y. 2009) aff'd380 F.App'x 22 (2d Cir. 2010); see also Specht, 306 F.3d at
32 ("[A] reference to the existence of license terms on a submerged screen is not
sufficient to place consumers on inquiry or constructive notice of those terms.");
Van Tassell, 795 F.Supp.2d at 792 (declining to enforce arbitration provision where
"a user only encounters the Conditions of Use after scrolling to the bottom of the
home page and clicking the "Customer Service' link, and then scrolling to the
bottom of the Customer Service page or clicking the 'conditions of Use, Notices &
Disclaimers' link located near the end of a list of links on the page."); Koch Indus.,
Inc. v. Does, No. 2:10CV1275DAK, [2011 BL 122670 ], 2011 WL 1775765, at *2425 (D. Utah May 9, 2011) (finding there was no manifested assent where the
"Terms of Use ... were available only through a hyperlink at the bottom of the page,
and there was no prominent notice that a user would be bound [*5]by those
terms."); Cvent, Inc. v. Eventbrite, Inc., 739 F.Supp.2d 927 , 936-37 (E.D. Va.
2010) (declining to enforce "Terms of Use" where "link only appears on event's
website via a link buried at the bottom of the first page" and "users of event's
website are not required to click on that link, nor are they required to read or
assent to the Terms of Use in order to use the website or access any of its
143
content."). We therefore agree with the Hinescourt: "Very little is required to form a
contract nowadays — but this alone does not suffice." 668 F.Supp.2d 362 , 367 .
Where, as here, there is no acceptance by Plaintiffs, no meeting of the minds, and
no manifestation of assent, there is no contract pursuant to Nevada law.
B. The Terms of Use Constitutes an Illusory Contract
The Priera Plaintiffs argue that because the Terms of Use grants Zappos the
unilateral right to revise the Arbitration Clause, the contract is illusory and therefore
unenforceable. In other words, Plaintiffs argue that the Arbitration Clause is illusory
because Zappos can avoid the promise to arbitrate simply by amending the
provision, while Zappos.com users are simultaneously bound to arbitration.
Most federal courts that have considered this issue have held that if a party retains
the unilateral, unrestricted right to terminate the arbitration agreement, it is
illusory and unenforceable, especially where there is no obligation to receive
consent from, or even notify, the other parties to the contract. See Doucrlas v.
Johnson Real Estate Investors, LLC, 470 F.App'x 823 , 825 (11th Cir. 2012).
("Because the employee handbook allowed Johnson to unilaterally modify the
arbitration procedures without notifying Douglas, the agreement to arbitrate was
illusory and invalid."); Morrison v. Amway Corp., 517 F.3d 248 , 257-58 (finding
arbitration agreement illusory and unenforceable where defendant held unilateral
authority to amend or eliminate the arbitration program); Dumais v. Am. Golf
Corp., 299 F.3d 1216 , 1219 (10th Cir. 2002) ("We join other circuits in holding
that an arbitration agreement allowing one party the unfettered right to alter the
arbitration agreement's existence or its scope is illusory."); Penn v. Ryan's Family
Steak Houses, Inc., 269 F.3d 753 , 759-61 (7th Cir. 2001) (denying motion to
compel arbitration where agreement was illusory because one party had "sole,
unilateral discretion to modify or amend"); Floss v. Ryan's Family Steak Houses,
Inc., 211 F.3d 306 , 315-316 (6th Cir. 2000) (arbitration agreement was "fatally
indefinite" and illusory because employer "reserved the right to alter applicable
rules and procedures without any obligation to notify, much less receive consent
from," other parties); Hooters of Am., Inc. v. Phillips, 173 F.3d 933 , 939 (4th Cir.
1999) (holding that employer's ability to modify rules "in whole or in part" without
notice to employee renders arbitration agreement illusory); Grosvenor v. Qwest
Corp., — F.Supp.2d , 2012 WL 602655, at *12 (D. Colo. Feb. 23, 2012) ("Because
Qwest reserved an unfettered ability to modify the existence, terms and scope of
the arbitration clause, it is illusory and unenforceable."); Harris v. Blockbuster, Inc.,
622 F.Supp.2d 396 , 398-99 (N.D. Tex. 2009) (arbitration clause in internet video
purchase agreement illusory because defendant reserved the right to alter [*6]the
terms of the agreement at any time by giving notice to the consumer); Snow v. BE
& KConstr. Co. 126 F.Supp.2d 5 , 14-15 (D. Me. 2001) (holding arbitration
agreement illusory and unenforceable because employer "reserve[d] the right to
modify or discontinue [the arbitration] program at any time"); Trumbull v. Century
Mktcr. Corp., 12 F.Supp.2d 683 , 686 (N.D. Ohio 1998) (finding no binding
arbitration agreement where "the plaintiff would be bound by all the terms of the
handbook while defendant could simply revoke any term (including the arbitration
clause) whenever it desired. Without mutuality of obligation, a contract cannot be
enforced.").
144
Here, the Terms of Use gives Zappos the right to change the Terms of Use,
including the Arbitration Clause, at any time without notice to the consumer. On
one side, the Terms of Use purportedly binds any user of the Zappos.com website
to mandatory arbitration. However, if a consumer sought to invoke arbitration
pursuant to the Terms of Use, nothing would prevent Zappos from unilaterally
changing the Terms and making those changes applicable to that pending dispute if
it determined that arbitration was no longer in its interest. In effect, the agreement
allows Zappos to hold its customers and users to the promise to arbitrate while
reserving its own escape hatch. By the terms of the Terms of Use, Zappos is free at
any time to require a consumer to arbitrate and/or litigate anywhere it sees fit,
while consumers are required to submit to arbitration in Las Vegas, Nevada.
Because the Terms of Use binds consumers to arbitration while leaving Zappos free
to litigate or arbitrate wherever it sees fit, there exists no mutuality of obligation.
We join those other federal courts that find such arbitration agreements illusory and
therefore unenforceable.
C. Equitable Estoppel
"The equitable estoppel doctrine prevents a plaintiff signatory to a contract that
contains an arbitration provision from avoiding the agreement to arbitrate if the
plaintiff's claims rely on the contract as the basis for relief." Ahlers v. Ryland Homes
Nev., LLC, No. 52511, 2010 WL 3276221, at *2 (Nev. 2010) (citing MS Dealer
Serv. Corp. v. Franklin, 177 F.3d 942 , 947 (11th Cir. 1999); Hughes Masonry v.
Greater Clark Ctv. Sch. Bldg., 659 F.2d 836 , 838 , 840-41 (7th Cir. 1981);
Metalclad v. Ventana Evntl., 1 Cal.Rptr.3d 328 , 34-35 (Cal.Ct.App. 2003).
Defendants argue that Plaintiffs cannot assert breach of contract actions against
Zappos.com while seeking to avoid the arbitration provision of the Terms of Use.
However, Plaintiffs' breach of contract claims do not rely upon the contract they
seek to avoid, the Terms of Use, which they never viewed, but on other statements
and guarantees found on the website. Furthermore, this issue is more appropriate
for individual litigation in each of the member cases of the MDL actions as it
depends on the allegations found in each complaint. We therefore decline to apply
the doctrine of equitable estoppel here.
V. Conclusion
A court cannot compel a party to arbitrate where that party has not previously
agreed to arbitrate. The arbitration provision found in the Zappos.com Terms of Use
purportedly binds all users of the website by virtue of their browsing. However, the
advent of the Internet has not changed the basic requirements of a contract, and
there is no agreement where there is no acceptance, no meeting of the minds, and
no manifestation of assent. A party cannot assent to terms of which it has no
knowledge or constructive notice, and a highly inconspicuous hyperlink buried
among a sea of links does not provide such notice. Because Plaintiffs did not assent
to the terms, no contract exists, and they cannot be compelled to arbitrate. In any
event, even if Plaintiffs could be said to have consented to the terms, the Terms of
Use constitutes an illusory contract because it allows Zappos to avoid arbitration by
145
unilaterally changing the Terms at any time, while binding any consumer to
mandatory arbitration in Las Vegas, Nevada. We therefore decline to enforce the
arbitration provision on two grounds: there is no contract, and even if there was, it
would be illusory and therefore unenforceable.
IT IS, THEREFORE, HEREBY ORDERED that Defendant Zappos.com, Inc.'s
Motion to Compel Arbitration and Stay Action (#3) is DENIED.
[fn1] Plaintiffs have named both Amazon and Zappos as Defendants. Defendants,
however, contend that Amazon does not do business as Zappos.com and is
therefore incorrectly named.
[fn2] In its original Transfer Order (#1), the MDL Panel transferred the following
nine cases to this Court, which were consolidated under In reZappos.com, Inc.,
Customer Data Security Breach Litigation, 3:12-cv-00325-RCJ-VPC:
1. Josh Richards v. Amazon.com, Inc., 6:12-cv-00212 (M.D. Fl.)
2. Sylvia St. Lawrence v. Zappos.com, Inc., 0:12-cv-60133 (S.D. Fl.)
3. Theresa D. Stevens v. Amazon.com, Inc., 3:12-cv-00032 (W.D. Ky.)
4. Stacy Penson v. Amazon.com, Inc., 3:12-CV-00036 (W.D. Ky.)
5. Tara J. Elliot, et al. v. Amazon.com, Inc., 3:12-cv-00037 (W.D. Ky.)
6. Dahlia Habashy v. Amazon.com, Inc., 1:12-cv-10145 (D. Mass.)
7. Stephanie Priera v. Zappos.com, Inc., 2:12-cv-00182 (D. Nev.)
8. Shari Simon, et al. v. Amazon.com, Inc., 2:12-cv-232 (D. Nev.)
9. Robert Ree v. Amazon.com, Inc. dbaZappos.com, 3 :12-cv-00072 (D. Nev.)
[fn3] The additional case is Zetha Nobles v. Zappos.com, Inc., 3:12-cv-03131(N.D.
Cal.)
[fn4] The Motion was originally filed on April 6, 2012 as Document No. 26 in
District of Nevada case 3:12-CV-00182.
[fn5] While which state's law should apply is not entirely clear given the plethora of
states from which these cases arise, the parties apply Nevada law in their
respective filings, and the Court will do the same.
HISCOCK, C. J., and CHASE, COLLIN, HOGAN, CRANE, and ANDREWS, JJ., concur.
Judgment accordingly.
Lefkowitz v. Great Minneapolis Surplus Store
86 N.W.2d 689 (Minn. 1957)
This is an appeal from an order of the Municipal Court of Minneapolis denying the
motion of the defendant for amended findings of fact, or, in the alternative, for a
new trial. The order for judgment awarded the plaintiff the sum of $ 138.50 as
damages for breach of contract.
This case grows out of the alleged refusal of the defendant to sell to the plaintiff a
certain fur piece which it had offered for sale in a newspaper advertisement. It
146
appears from the record that on April 6, 1956, the defendant published the
following advertisement in a Minneapolis newspaper:
"Saturday 9 a.m. sharp
3 Brand New Fur Coats
Worth to $ 100.00
First Come, First Served
$ 1 Each"
On April 13, the defendant again published an advertisement in the same
newspaper as follows:
"Saturday 9 a.m.
2 Brand New Pastel Mink 3-Skin Scarfs
Selling for $ 89.50
Out they go Saturday.
Each . . . . $ 1.00
1 Black Lapin Stole
Beautiful, worth $ 139.50 . . . $ 1.00
First Come, First Served"
The record supports the findings of the court that on each of the Saturdays
following the publication of the above-described ads the plaintiff was the first to
present himself at the appropriate counter in the defendant's store and on each
occasion demanded the coat and the stole so advertised and indicated his readiness
to pay the sale price of $ 1. On both occasions, the defendant refused to sell the
merchandise to the plaintiff, stating on the first occasion that by a "house rule" the
offer was intended for women only and sales would not be made to men, and on
the second visit that plaintiff knew defendant's house rules.
The trial court properly disallowed plaintiff's claim for the value of the fur coats
since the value of these articles was speculative and uncertain. The only evidence
of value was the advertisement itself to the effect that the coats were "Worth to $
100.00," how much less being speculative especially in view of the price for which
they were offered for sale. With reference to the offer of the defendant on April 13,
1956, to sell the "1 Black Lapin Stole * * * worth $ 139.50 * * *" the trial court
held that the value of this article was established and granted judgment in favor of
the plaintiff for that amount less the $ 1 quoted purchase price.
1. The defendant contends that a newspaper advertisement offering items of
merchandise for sale at a named price is a "unilateral offer" which may be
withdrawn without notice. He relies upon authorities which hold that, where an
advertiser publishes in a newspaper that he has a certain quantity or quality of
goods which he wants to dispose of at certain prices and on certain terms, such
advertisements are not offers which become contracts as soon as any person to
whose notice they may come signifies his acceptance by notifying the other that he
will take a certain quantity of them. Such advertisements have been construed as
an invitation for an offer of sale on the terms stated, which offer, when received,
may be accepted or rejected and which therefore does not become a contract of
sale until accepted by the seller; and until a contract has been so made, the seller
may modify or revoke such prices or terms. . . .
147
The defendant relies principally on Craft v. Elder & Johnston Co. supra. In that
case, the court discussed the legal effect of an advertisement offering for sale, as a
one-day special, an electric sewing machine at a named price. The view was
expressed that the advertisement was (34 Ohio L.A. 605, 38 N.E. [2d] 417) "not an
offer made to any specific person but was made to the public generally. Thereby it
would be properly designated as a unilateral offer and not being supported by any
consideration could be withdrawn at will and without notice." It is true that such an
offer may be withdrawn before acceptance. Since all offers are by their nature
unilateral because they are necessarily made by one party or on one side in the
negotation of a contract, the distinction made in that decision between a unilateral
offer and a unilateral contract is not clear. On the facts before us we are concerned
with whether the advertisement constituted an offer, and, if so, whether the
plaintiff's conduct constituted an acceptance.
There are numerous authorities which hold that a particular advertisement in a
newspaper or circular letter relating to a sale of articles may be construed by the
court as constituting an offer, acceptance of which would complete a contract. . . .
The test of whether a binding obligation may originate in advertisements addressed
to the general public is "whether the facts show that some performance was
promised in positive terms in return for something requested." 1 Williston,
Contracts (Rev. ed.) § 27.
The authorities above cited emphasize that, where the offer is clear, definite, and
explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance
of which will complete the contract. The most recent case on the subject is Johnson
v. Capital City Ford Co. (La. App.) 85 So. (2d) 75, in which the court pointed out
that a newspaper advertisement relating to the purchase and sale of automobiles
may constitute an offer, acceptance of which will consummate a contract and create
an obligation in the offeror to perform according to the terms of the published offer.
Whether in any individual instance a newspaper advertisement is an offer rather
than an invitation to make an offer depends on the legal intention of the parties and
the surrounding circumstances. Annotation, 157 A.L.R. 744, 751; 77 C.J.S., Sales,
§ 25b; 17 C.J.S., Contracts, § 389. We are of the view on the facts before us that
the offer by the defendant of the sale of the Lapin fur was clear, definite, and
explicit, and left nothing open for negotiation. The plaintiff having successfully
managed to be the first one to appear at the seller's place of business to be served,
as requested by the advertisement, and having offered the stated purchase price of
the article, he was entitled to performance on the part of the defendant. We think
the trial court was correct in holding that there was in the conduct of the parties a
sufficient mutuality of obligation to constitute a contract of sale.
2. The defendant contends that the offer was modified by a "house rule" to the
effect that only women were qualified to receive the bargains advertised. The
advertisement contained no such restriction. This objection may be disposed of
briefly by stating that, while an advertiser has the right at any time before
acceptance to modify his offer, he does not have the right, after acceptance, to
impose new or arbitrary conditions not contained in the published offer. . . .
Affirmed.
148
Procd V. Matthew Zeidenberg (Part 1)
86 F.3d 1447, June 20, 1996, Decided
EASTERBROOK, Circuit Judge. Must buyers of computer software obey the
terms of shrinkwrap licenses? The district court held not, for two reasons: first,
they are not contracts because the licenses are inside the box rather than printed
on the outside; second, federal law forbids enforcement even if the licenses are
contracts. 908 F. Supp. 640 (W.D. Wis. 1996). The parties and numerous amici
curiae have briefed many other issues, but these are the only two that matter--and
we disagree with the district judge's conclusion on each. Shrinkwrap licenses are
enforceable unless their terms are objectionable on grounds applicable to contracts
in general (for example, if they violate a rule of positive law, or if they are
unconscionable). Because no one argues that the terms of the license at issue here
are troublesome, we remand with instructions to enter judgment for the plaintiff.
I
ProCD, the plaintiff, has compiled information from more than 3,000 telephone
directories into a computer database. We may assume that this database cannot be
copyrighted, although it is more complex, contains more information (nine-digit zip
codes and census industrial codes), is organized differently, and therefore is more
original than the single alphabetical directory at issue in Feist Publications, Inc. v.
Rural Telephone Service Co., 499 U.S. 340, 113 L. Ed. 2d 358, 111 S. Ct. 1282
(1991). See Paul J. Heald, The Vices of Originality, 1991 Sup. Ct. Rev. 143, 160-68.
ProCD sells a version of the database, called SelectPhone (trademark), on CD-ROM
discs. (CD-ROM means "compact disc--read only memory." The "shrinkwrap
license" gets its name from the fact that retail software packages are covered in
plastic or cellophane "shrinkwrap," and some vendors, though not ProCD, have
written licenses that become effective as soon as the customer tears the wrapping
from the package. Vendors prefer "end user license," but we use the more common
term.) A proprietary method of compressing the data serves as effective encryption
too. Customers decrypt and use the data with the aid of an application program
that ProCD has written. This program, which is copyrighted, searches the database
in response to users' criteria (such as "find all people named Tatum in Tennessee,
plus all firms with 'Door Systems' in the corporate name"). The resulting lists (or,
as ProCD prefers, "listings") can be read and manipulated by other software, such
as word processing programs.
The database in SelectPhone (trademark) cost more than $ 10 million to compile
and is expensive to keep current. It is much more valuable to some users than to
others. The combination of names, addresses, and sic codes enables manufacturers
to compile lists of potential customers. Manufacturers and retailers pay high prices
to specialized information intermediaries for such mailing lists; ProCD offers a
potentially cheaper alternative. People with nothing to sell could use the database
as a substitute for calling long distance information, or as a way to look up old
friends who have moved to unknown towns, or just as a electronic substitute for
the local phone book. ProCD decided to engage in price discrimination, selling its
database to the general public for personal use at a low price (approximately $ 150
149
for the set of five discs) while selling information to the trade for a higher price. It
has adopted some intermediate strategies too: access to the SelectPhone
(trademark) database is available via the America On-line service for the price
America Online charges to its clients (approximately $ 3 per hour), but this service
has been tailored to be useful only to the general public.
If ProCD had to recover all of its costs and make a profit by charging a single
price--that is, if it could not charge more to commercial users than to the general
public--it would have to raise the price substantially over $ 150. The ensuing
reduction in sales would harm consumers who value the information at, say, $ 200.
They get a consumer surplus of $ 50 under the current arrangement but would
cease to buy if the price rose substantially. If because of high elasticity of demand
in the consumer segment of the market the only way to make a profit turned out to
be a price attractive to commercial users alone, then all consumers would lose out-and so would the commercial clients, who would have to pay more for the listings
because ProCD could not obtain any contribution toward costs from the consumer
market.
To make price discrimination work, however, the seller must be able to control
arbitrage. An air carrier sells tickets for less to vacationers than to business
travelers, using advance purchase and Saturday-night-stay requirements to
distinguish the categories. A producer of movies segments the market by time,
releasing first to theaters, then to pay-per-view services, next to the videotape and
laserdisc market, and finally to cable and commercial tv. Vendors of computer
software have a harder task. Anyone can walk into a retail store and buy a box.
Customers do not wear tags saying "commercial user" or "consumer user." Anyway,
even a commercial-user-detector at the door would not work, because a consumer
could buy the software and resell to a commercial user. That arbitrage would break
down the price discrimination and drive up the minimum price at which ProCD
would sell to anyone.
Instead of tinkering with the product and letting users sort themselves--for
example, furnishing current data at a high price that would be attractive only to
commercial customers, and two-year-old data at a low price--ProCD turned to the
institution of contract. Every box containing its consumer product declares that the
software comes with restrictions stated in an enclosed license. This license, which is
encoded on the CD-ROM disks as well as printed in the manual, and which appears
on a user's screen every time the software runs, limits use of the application
program and listings to non-commercial purposes.
Matthew Zeidenberg bought a consumer package of SelectPhone (trademark) in
1994 from a retail outlet in Madison, Wisconsin, but decided to ignore the license.
He formed Silken Mountain Web Services, Inc., to resell the information in the
SelectPhone (trademark) database. The corporation makes the database available
on the Internet to anyone willing to pay its price--which, needless to say, is less
than ProCD charges its commercial customers. Zeidenberg has purchased two
additional SelectPhone (trademark) packages, each with an updated version of the
database, and made the latest information available over the World Wide Web, for
a price, through his corporation. ProCD filed this suit seeking an injunction against
further dissemination that exceeds the rights specified in the licenses (identical in
each of the three packages Zeidenberg purchased). The district court held the
licenses ineffectual because their terms do not appear on the outside of the
150
packages. The court added that the second and third licenses stand no different
from the first, even though they are identical, because they might have been
different, and a purchaser does not agree to--and cannot be bound by--terms that
were secret at the time of purchase. 908 F. Supp. at 654.
II
Following the district court, we treat the licenses as ordinary contracts
accompanying the sale of products, and therefore as governed by the common law
of contracts and the Uniform Commercial Code. Whether there are legal differences
between "contracts" and "licenses" (which may matter under the copyright doctrine
of first sale) is a subject for another day. See Microsoft Corp. v. Harmony
Computers & Electronics, Inc., 846 F. Supp. 208 (E.D. N.Y. 1994). Zeidenberg does
not argue that Silken Mountain Web Services is free of any restrictions that apply to
Zeidenberg himself, because any effort to treat the two parties as distinct would put
Silken Mountain behind the eight ball on ProCD's argument that copying the
application program onto its hard disk violates the copyright laws. Zeidenberg does
argue, and the district court held, that placing the package of software on the shelf
is an "offer," which the customer "accepts" by paying the asking price and leaving
the store with the goods. Peeters v. State, 154 Wis. 111, 142 N.W. 181 (1913). In
Wisconsin, as elsewhere, a contract includes only the terms on which the parties
have agreed. One cannot agree to hidden terms, the judge concluded. So far, so
good--but one of the terms to which Zeidenberg agreed by purchasing the software
is that the transaction was subject to a license. Zeidenberg's position therefore
must be that the printed terms on the outside of a box are the parties' contract-except for printed terms that refer to or incorporate other terms. But why would
Wisconsin fetter the parties' choice in this way? Vendors can put the entire terms of
a contract on the outside of a box only by using microscopic type, removing other
information that buyers might find more useful (such as what the software does,
and on which computers it works), or both. The "Read Me" file included with most
software, describing system requirements and potential incompatibilities, may be
equivalent to ten pages of type; warranties and license restrictions take still more
space. Notice on the outside, terms on the inside, and a right to return the software
for a refund if the terms are unacceptable (a right that the license expressly
extends), may be a means of doing business valuable to buyers and sellers alike.
See E. Allan Farnsworth, 1 Farnsworth on Contracts § 4.26 (1990); Restatement
(2d) of Contracts § 211 comment a (1981) ("Standardization of agreements serves
many of the same functions as standardization of goods and services; both are
essential to a system of mass production and distribution. Scarce and costly time
and skill can be devoted to a class of transactions rather than the details of
individual transactions."). Doubtless a state could forbid the use of standard
contracts in the software business, but we do not think that Wisconsin has done so.
Transactions in which the exchange of money precedes the communication of
detailed terms are common. Consider the purchase of insurance. The buyer goes to
an agent, who explains the essentials (amount of coverage, number of years) and
remits the premium to the home office, which sends back a policy. On the district
judge's understanding, the terms of the policy are irrelevant because the insured
paid before receiving them. Yet the device of payment, often with a "binder" (so
that the insurance takes effect immediately even though the home office reserves
the right to withdraw coverage later), in advance of the policy, serves buyers'
151
interests by accelerating effectiveness and reducing transactions costs. Or consider
the purchase of an airline ticket. The traveler calls the carrier or an agent, is quoted
a price, reserves a seat, pays, and gets a ticket, in that order. The ticket contains
elaborate terms, which the traveler can reject by canceling the reservation. To use
the ticket is to accept the terms, even terms that in retrospect are
disadvantageous. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 113 L. Ed.
2d 622, 111 S. Ct. 1522 (1991); see also Vimar Seguros y Reaseguros, S.A. v. M/V
Sky Reefer, 132 L. Ed. 2d 462, 115 S. Ct. 2322 (1995) (bills of lading). Just so with
a ticket to a concert. The back of the ticket states that the patron promises not to
record the concert; to attend is to agree. A theater that detects a violation will
confiscate the tape and escort the violator to the exit. One could arrange things so
that every concertgoer signs this promise before forking over the money, but that
cumbersome way of doing things not only would lengthen queues and raise prices
but also would scotch the sale of tickets by phone or electronic data service.
Consumer goods work the same way. Someone who wants to buy a radio set
visits a store, pays, and walks out with a box. Inside the box is a leaflet containing
some terms, the most important of which usually is the warranty, read for the first
time in the comfort of home. By Zeidenberg's lights, the warranty in the box is
irrelevant; every consumer gets the standard warranty implied by the UCC in the
event the contract is silent; yet so far as we are aware no state disregards
warranties furnished with consumer products. Drugs come with a list of ingredients
on the outside and an elaborate package insert on the inside. The package insert
describes drug interactions, contraindications, and other vital information--but, if
Zeidenberg is right, the purchaser need not read the package insert, because it is
not part of the contract.
Next consider the software industry itself. Only a minority of sales take place
over the counter, where there are boxes to peruse. A customer pay place an order
by phone in response to a line item in a catalog or a review in a magazine. Much
software is ordered over the Internet by purchasers who have never seen a box.
Increasingly software arrives by wire. There is no box; there is only a stream of
electrons, a collection of information that includes data, an application program,
instructions, many limitations ("MegaPixel 3.14159 cannot be used with BytePusher 2.718"), and the terms of sale. The user purchases a serial number, which
activates the software's features. On Zeidenberg's arguments, these unboxed sales
are unfettered by terms--so the seller has made a broad warranty and must pay
consequential damages for any shortfalls in performance, two "promises" that if
taken seriously would drive prices through the ceiling or return transactions to the
horse-and-buggy age.
According to the district court, the UCC does not countenance the sequence of
money now, terms later. (Wisconsin's version of the UCC does not differ from the
Official Version in any material respect, so we use the regular numbering system.
Wis. Stat. § 402.201 corresponds to UCC § 2-201, and other citations are easy to
derive.) One of the court's reasons--that by proposing as part of the draft Article 2B
a new UCC § 2-2203 that would explicitly validate standard-form user licenses, the
American Law Institute and the National Conference of Commissioners on Uniform
Laws have conceded the invalidity of shrinkwrap licenses under current law, see
908 F. Supp. at 655-66--depends on a faulty inference. To propose a change in a
law's text is not necessarily to propose a change in the law's effect. New words may
152
be designed to fortify the current rule with a more precise text that curtails
uncertainty. To judge by the flux of law review articles discussing shrinkwrap
licenses, uncertainty is much in need of reduction--although businesses seem to
feel less uncertainty than do scholars, for only three cases (other than ours) touch
on the subject, and none directly addresses it. See Step-Saver Data Systems, Inc.
v. Wyse Technology, 939 F.2d 91 (3d Cir. 1991); Vault Corp. v. Quaid Software
Ltd., 847 F.2d 255, 268-70 (5th Cir. 1988); Arizona Retail Systems, Inc. v.
Software Link, Inc., 831 F. Supp. 759 (D. Ariz. 1993). As their titles suggest, these
are not consumer transactions. Step-Saver is a battle-of-the-forms case, in which
the parties exchange incompatible forms and a court must decide which prevails.
See Northrop Corp. v. Litronic Industries, 29 F.3d 1173 (7th Cir. 1994) (Illinois
law); Douglas G. Baird & Robert Weisberg, Rules, Standards, and the Battle of the
Forms: A Reassessment of § 2-207, 68 Va. L. Rev. 1217, 1227-31 (1982). Our
case has only one form; UCC § 2-207 is irrelevant. Vault holds that Louisiana's
special shrinkwrap-license statute is preempted by federal law, a question to which
we return. And Arizona Retail Systems did not reach the question, because the
court found that the buyer knew the terms of the license before purchasing the
software.
What then does the current version of the UCC have to say? We think that the
place to start is § 2-204(1): "A contract for sale of goods may be made in any
manner sufficient to show agreement, including conduct by both parties which
recognizes the existence of such a contract." A vendor, as master of the offer, may
invite acceptance by conduct, and may propose limitations on the kind of conduct
that constitutes acceptance. A buyer may accept by performing the acts the vendor
proposes to treat as acceptance. And that is what happened. ProCD proposed a
contract that a buyer would accept by using the software after having an
opportunity to read the license at leisure. This Zeidenberg did. He had no choice,
because the software splashed the license on the screen and would not let him
proceed without indicating acceptance. So although the district judge was right to
say that a contract can be, and often is, formed simply by paying the price and
walking out of the store, the UCC permits contracts to be formed in other ways.
ProCD proposed such a different way, and without protest Zeidenberg agreed. Ours
is not a case in which a consumer opens a package to find an insert saying "you
owe us an extra $ 10,000" and the seller files suit to collect. Any buyer finding such
a demand can prevent formation of the contract by returning the package, as can
any consumer who concludes that the terms of the license make the software worth
less than the purchase price. Nothing in the UCC requires a seller to maximize the
buyer's net gains.
Section 2-606, which defines "acceptance of goods", reinforces this
understanding. A buyer accepts goods under § 2-606(1)(b) when, after an
opportunity to inspect, he fails to make an effective rejection under § 2-602(1).
ProCD extended an opportunity to reject if a buyer should find the license terms
unsatisfactory; Zeidenberg inspected the package, tried out the software, learned
of the license, and did not reject the goods. We refer to § 2-606 only to show that
the opportunity to return goods can be important; acceptance of an offer differs
from acceptance of goods after delivery, see Gillen v. Atalanta Systems, Inc., 997
F.2d 280, 284 n.1 (7th Cir. 1993); but the UCC consistently permits the parties to
153
structure their relations so that the buyer has a chance to make a final decision
after a detailed review.
Some portions of the UCC impose additional requirements on the way parties
agree on terms. A disclaimer of the implied warranty of merchantability must be
"conspicuous." UCC § 2-316(2), incorporating UCC § 1-201(10). Promises to make
firm offers, or to negate oral modifications, must be "separately signed." UCC § §
2-205, 2-209(2). These special provisos reinforce the impression that, so far as the
UCC is concerned, other terms may be as inconspicuous as the forum-selection
clause on the back of the cruise ship ticket in Carnival Lines. Zeidenberg has not
located any Wisconsin case--for that matter, any case in any state--holding that
under the UCC the ordinary terms found in shrinkwrap licenses require any special
prominence, or otherwise are to be undercut rather than enforced. In the end, the
terms of the license are conceptually identical to the contents of the package. Just
as no court would dream of saying that SelectPhone (trademark) must contain
3,100 phone books rather than 3,000, or must have data no more than 30 days
old, or must sell for $ 100 rather than $ 150--although any of these changes would
be welcomed by the customer, if all other things were held constant--so, we
believe, Wisconsin would not let the buyer pick and choose among terms. Terms of
use are no less a part of "the product" than are the size of the database and the
speed with which the software compiles listings. Competition among vendors, not
judicial revision of a package's contents, is how consumers are protected in a
market economy. Digital Equipment Corp. v. Uniq Digital Technologies, Inc., 73
F.3d 756 (7th Cir. 1996). ProCD has rivals, which may elect to compete by offering
superior software, monthly updates, improved terms of use, lower price, or a better
compromise among these elements. As we stressed above, adjusting terms in
buyers' favor might help Matthew Zeidenberg today (he already has the software)
but would lead to a response, such as a higher price, that might make consumers
as a whole worse off. . .
`
MARK HARRIS et al., Plaintiffs and Appellants,
v.
TIME, INC., Defendant and Respondent
191 Cal.App.3d 449 (1987)
KING, J.
In this action where plaintiffs suffered no damage or loss other than having been
enticed by the external wording of a piece of bulk rate mail to open the envelope,
believing that doing so would result in the receipt of a free plastic calculator watch,
we hold that the maxim “the law disregards trifles” applies and dismissal of the
action was proper on this ground . . .
It all began one day when Joshua Gnaizda, the three-year-old son of a
prominent Bay Area public interest attorney, received what he (or his mother)
thought was a tantalizing offer in the mail from Time. The front of the envelope
contained two see-through windows partialy revealing the envelope's contents. One
window showed Joshua's name and address. The other revealed the following
statement: “JOSHUA A. GNAIZDA, I'LL GIVE YOU THIS VERSATILE NEW
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CALCULATOR WATCH FREE Just for, Opening this Envelope Before Feb. 15, 1985.”
Beneath the offer was a picture of the calculator watch itself. Joshua's mother
opened the envelope and apparently realized she had been deceived by a ploy to
get her to open a piece of junk mail. The see-through window had not revealed the
full text of Time's offer. Printed below the picture of the calculator watch, and not
viewable through the see-through window, were the following additional words:
“AND MAILING THIS CERTIFICATE TODAY!” The certificate itself clearly required
that Joshua purchase a subscription to Fortune magazine in order to receive the
free calculator watch.
As is so often true in life situations these days, the certificate contained both
good news and bad news. The good news was that Joshua could save up to 66
percent on the subscription, which might even be tax deductible. Even more
important to the bargain hunter, prices might never be this low again. The bad
news was that Time obviously had no intention of giving Joshua the versatile new
calculator watch just for opening the envelope.
Although most of us, while murmuring an appropriate expletive, would have
simply thrown away the mailer, and some might have stood on principle and filed
an action in small claims court to obtain the calculator watch, Joshua's father did
something a little different: he launched a $15 million lawsuit in San Francisco
Superior Court.
The action was prosecuted by Joshua, through his father, and by Mark Harris
and Richard Baker, who had also received the same mailer. We are not informed of
the ages of Harris and Baker. The complaint alleged one cause of action for breach
of contract, three causes of action for statutory unfair advertising, and four causes
of action for promissory estoppel and fraud.
The complaint sought the following relief: (1) a declaration that all recipients of
the mailer were entitled to receive the promised item or to rescind subscriptions
they had purchased, (2) an injunction against future similar mailings, (3)
compensatory damages in an amount equal to the value of the item, and (4) $15
million punitive damages to be awarded to a consumer fund “to be used for
education and advocacy on behalf of consumer protection and enforcement of laws
against unfair business practices.”
The complaint also alleged that before commencing litigation, Joshua's father
demanded that Time give Joshua a calculator watch without requiring a
subscription. Time not only refused to give a watch, it did not even give Joshua or
his father the time of day. There was no allegation that Harris or Baker made such
a demand on Time.
Time demurred to the entire complaint for failure to state facts sufficient to
constitute a cause of action. The court sustained the demurrer as to the causes of
action for breach of contract, promissory estoppel and fraud, but overruled the
demurrer as to the causes of action for unfair advertising.
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However, Time subsequently obtained summary judgment on the causes of
action for unfair advertising. Based on the orders sustaining the demurrer and
granting summary judgment, the court rendered a judgment of dismissal.
Plaintiffs filed a notice of appeal after the court granted summary judgment, but
two days before rendition of the judgment itself. We treat the notice of appeal as
filed immediately after entry of judgment. (Cal. Rules of Court, rule 2(c).)
The appeal challenges the dismissal only as to the causes of action for breach of
contract and unfair advertising. Plaintiffs state in their opening brief that they
abandon the causes of action for promissory estoppel and fraud . . .
II Breach of Contract
In sustaining the demurrer as to the cause of action for breach of contract, the
court stated no specific grounds for its ruling. Time had argued the complaint did
not allege an offer, did not allege adequate consideration, and did not allege notice
of performance by the plaintiffs. On appeal, plaintiffs challenge each of these points
as a basis for dismissal.
A. Offer.
(1a) On the first point, Time argues there was no contract because the text of
the unopened mailer amounted to a mere advertisement rather than an offer.
(2) It is true that advertisements are not typically treated as offers, but merely
as invitations to bargain. (1 Corbin on Contracts (1963) § 25, pp. 74-75; Rest.2d,
Contracts, § 26, com, b, at p. 76.) There is, however, a fundamental exception to
this rule: an advertisement can constitute an offer, and form the basis of a
unilateral contract, if it calls for performance of a specific act without further
communication and leaves nothing for further negotiation. (Lefkowitz v. Great
Minneapolis Surplus Store (1957) 251 Minn. 188 [86 N.W.2d 689, 691]; 1 Corbin
on Contracts (1963) §§ 25, 64, pp. 75-76, 264-270; Rest.2d, Contracts, § 26, com.
b, at p. 76.) This is a basic rule of contract law, contained in the Restatement
Second of Contracts and normally encountered within the first few weeks of law
school in cases such as Lefkowitz (furs advertised for sale at specified date and
time for “$1.00 First Come First Served”) and Carlill v. Carbolic Smoke Ball Co.
(1893) 1 Q.B. 256 (advertisement of reward to anyone who caught influenza after
using seller's medicine). (See, e.g., Murphy & Speidel, Studies in Contract Law (3d
ed. 1984) pp. 112, 154.)
(1b) The text of Time's unopened mailer was, technically, an offer to enter into a
unilateral contract: the promisor made a promise to do something (give the
recipient a calculator watch) in exchange for the performance of an act by the
promise (opening the envelope). Time was not in the same position as a seller
merely advertising price; the proper analogy is to a seller promising to give
something to a customer in exchange for the customer's act of coming to the store
at a specified time. (Lefkowitz v. Great Minneapolis Surplus Store, supra, 86
N.W.2d 689.)
156
B. Consideration.
(3a) Time also argues that there was no contract because the mere act of
opening the envelope was valueless and therefore did not constitute adequate
consideration. Technically, this is incorrect. (4) It is basic modern contract law that,
with certain exceptions not applicable here (such as illegality or preexisting legal
duty), any bargained-for act or forbearance will constitute adequate consideration
for a unilateral contract. Courts will not require equivalence in the values
exchanged or otherwise question the adequacy of the consideration. If a
performance is bargained for, there is no further requirement of benefit to the
promisor or detriment to the promisee.
(3b) Moreover, the act at issue here - the opening of the envelope, with
consequent exposure to Time's sales pitch - may have been relatively insignificant
to the plaintiffs, but it was of great value to Time. At a time when our homes are
bombarded daily by direct mail advertisements and solicitations, the name of the
game for the advertiser or solicitor is to get the recipient to open the envelope.
Some advertisers, like Time in the present case, will resort to ruse or trick to
achieve this goal. From Time's perspective, the opening of the envelope was
“valuable consideration” in every sense of that phrase.
Thus, assuming (as we must at this juncture) that the allegations of the
complaint are true, Time made an offer proposing a unilateral contract, and
plaintiffs supplied adequate consideration for that contract when they performed
the act of opening the envelope and exposing themselves to the sales pitch within.
...
III Conclusion
(7) As a final argument, Time claims the judgment of dismissal was correct
based on the legal maxim “de minimis non curat lex,” or “the law disregards
trifles.” (Civ. Code, § 3533.) In this age of the consumer class action this maxim
usually has little value. However, the present action is “de minimis” in the extreme.
This lawsuit is an absurd waste of the resources of this court, the superior court,
the public interest law firm handling the case and the citizens of California whose
taxes fund our judicial system. It is not a use for which our legal system is
designed.
As a practical matter, plaintiffs' real complaint is that they were tricked into
opening a piece of junk mail, not that they were misled into buying anything or
expending more than the effort necessary to open an envelope. If Joshua's mother
lost the initial skirmish in the battle of direct mail advertising by opening the
envelope, she could have won the war by simply throwing the thing away. If she
were angry she might even have returned Time's business reply envelope empty,
requiring Time to pay the return postage. If she felt particularly hostile, she might
have inserted a nasty note or other evidence of her displeasure in the reply
envelope. A $15 million lawsuit, filed in a superior court underfunded and already
overburdened with serious felony prosecutions and complex civil litigation involving
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catastrophic injury from asbestos, prescription drugs and intrauterine devices, is a
vast overreaction. The law may permit junk mail to be delivered for a lower cost
than the individual citizen must pay. It does not require that the public subsidize
junk litigation.
For many, an unpleasant aspect of contemporary American life is returning to
the sanctity of one's home each day and emptying the mailbox, only to be
inundated with advertisements and solicitations. Some days, among all of the junk
mail, one is fortunate to be able to locate a bill, let alone a letter from a friend or
loved one. Insult is added to injury when one realizes that individual citizens must
pay first class postage rates to send their mail, while junk mail, for reasons
apparent only to Congress and the United States Postal Service, is sent at less onehalf of that rate. The irritation level soars to new heights when, succumbing to the
cleverness or ruse of the sender of junk mail and believing one is being offered
something for nothing, one actually opens an envelope and examines its contents,
both of which would otherwise been deposited unopened in their rightful place, the
garbage can. Snake oil salesmen have been replaced by bulk rate advertisers
whose wares must be causing our postal carriers' backs to be nearing the breaking
point under the weight of such mail.
As much as one might decry this intrusion into our lives and our homes and
sympathize with Joshua's plight, eliminating it lies with Congress, not the courts.
The courts cannot solve every complaint or right every technical wrong, particularly
one which causes no actual damage beyond the loss of the few seconds it takes to
open an envelope and examine its contents. Our courts are too heavily
overburdened to be used as a vehicle to punish by one whose only real damage is
feeling foolish for having opened what obviously was junk mail.
We therefore affirm, despite the partial technical validity of the action, because
the judgment is correct based on the “de minimis” theory.
(8) A judgment that is correct on any theory will be affirmed even if the reasons
stated by the trial court in support of the judgment were wrong. (Davey v.
Southern Pacific Co., supra, 116 Cal. at p.329.)
The judgment is affirmed. The parties shall bear their own costs on appeal.
Low, P. J., and Haning, J., concurred.
Cole-McIntyre-Norfleet Co. v. Holloway
214 S.W. 817 (Tenn. 1919)
Lansden, C. J.
This case presents a question of law, which, so far as we are advised, has not
been decided by this court in its exact phases. March 26, 1917, a traveling
salesman of plaintiff in error solicited and received from defendant in error, at his
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country store in Shelby county, Tenn., an order for certain goods, which he was
authorized to sell. Among these goods were 50 barrels of meal. The meal was to be
ordered out by defendant by the 3lst day of July, and afterwards 5 cents per barrel
per month was to be charged him for storage.
After the order was given, the defendant heard nothing from it until the 26th
of May, 1917, when he was in the place of business of plaintiff in error, and told it
to begin shipment of the meal on his contract. He was informed by plaintiff in error
that he did not accept the order of March 26th, and for that reason the defendant
had no contract for meal.
The defendant in error never received confirmation or rejection from plaintiff
in error, or other refusal to fill the order. The same traveling salesman of plaintiff in
error called on defendant as often as once each week, and this order was not
mentioned to defendant, either by him or by his principals, in any way. Between the
day of its alleged rejection, prices on all of the articles in the contract greatly
advanced. All of the goods advanced about 50 percent in value.
Some jobbers at Memphis received orders from their drummers, and filled
the orders or notified the purchaser that the orders were rejected; but this method
was not followed by plaintiff in error.
The contract provided that it was not binding until accepted by the seller at
its office in Memphis, and that the salesman had no authority to sign the contract
for either the seller or buyer. It was further stipulated that the order should not be
subject to countermand.
It will be observed that plaintiff in error was silent upon both the acceptance
and rejection of the contract. It sent forth its salesman to solicit this and other
orders. The defendant in error did not have the right to countermand orders and
the contract was closed, if and when it was accepted by plaintiff in error. The proof
that some jobbers in Memphis uniformly filled such order unless the purchaser was
notified to the contrary is of no value because it does not amount to a custom.
The case, therefore, must be decided upon its facts. The circuit court and the
court of civil appeals were both of opinion that the contract was completed because
of the lapse of time before plaintiff in error rejected it. The time intervening
between the giving of the order by defendant and its alleged repudiation by plaintiff
in error was about 60 days. Weekly opportunities were afforded the salesman of
plaintiff in error to notify the defendant in error of the rejection of the contract,
and, of course, daily occasions were afforded plaintiff in error to notify him by mail
or wire. The defendant believed the contract was in force on the 26th of May,
because he directed plaintiff in error to begin shipment of the meal on that day.
Such shipments were to have been completed by July 31st, or defendant to pay
storage charges. From this evidence the Circuit Court found as an inference of fact
that plaintiff in error had not acted within a reasonable time, and therefore its
silence would be construed as an acceptance of the contract. The question of
whether the delay of plaintiff in error was reasonable or unreasonable was one of
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fact, and the circuit court was justified from the evidence in finding that the delay
was unreasonable. Hence the case, as it comes to us, is whether delay upon the
part of plaintiff in error for an unreasonable time in notifying the defendant in error
of its action upon the contract is an acceptance of its terms.
We think such delay was unreasonable, and effected an acceptance of the
contract. It should not be forgotten that this is not the case of an agent exceeding
his authority, or acting without authority. Even in such cases the principal must
accept or reject the benefits of the contract promptly and within a reasonable time.
Williams v. Storm, 6 Cold. 207.
Plaintiff's agent in this case was authorized to do precisely that which he
could do, both as to time and substance. The only thing which was left open by the
contract was the acceptance or rejection of its terms by plaintiff in error. It will not
do to say that a seller of goods like these could wait indefinitely to decide whether
or not he will accept the offer of the proposed buyer. This was all done in the usual
course of business, and the articles embraced within the contract were consumable
in the use, and some of them would become unfitted for the market within a short
time.
It is undoubtedly true that an offer to buy or sell is not binding until its
acceptance is communicated to the other party. The acceptance, however, of such
an offer, may be communicated by the other party either by a formal acceptance,
or acts amounting to an acceptance. Delay in communicating action as to the
acceptance may amount to an acceptance itself.
When the subject of a contract, either in its nature or by virtue of conditions of the
market, will become unmarketable by delay, delay in notifying the other party of
his decision will amount to an acceptance by the offeror. Otherwise, the offeror
could place his goods upon the market, and solicit orders, and yet hold the other
party to the contract, while he reserves time to himself to see if the contract will be
profitable.
Writ denied.
Joe Douglas v. Talk America Inc.
495 F.3d 1062 C.A.9 (Cal.),2007
PER CURIAM:
We consider whether a service provider may change the terms of its service
contract by merely posting a revised contract on its website.
160
Facts
Joe Douglas contracted for long distance telephone service with America Online.
Talk America subsequently acquired this business from AOL and continued to
provide telephone service to AOL's former customers. Talk America then added four
provisions to the service contract: (1) additional service charges; (2) a class action
waiver; (3) an arbitration clause; and (4) a choice-of-law provision pointing to New
York law. Talk America posted the revised contract on its website but, according to
Douglas, it never notified him that the contract had changed. Unaware of the new
terms, Douglas continued using Talk America's services for four years.
After becoming aware of the additional charges, Douglas filed a class action
lawsuit in district court, charging Talk America with violations of the Federal
Communications Act, breach of contract and violations of various California
consumer protection statutes. Talk America moved to compel arbitration based on
the modified contract and the district court granted the motion. Because the
Federal Arbitration Act, 9 U.S.C. § 16, does not authorize interlocutory appeals of a
district court order compelling arbitration, Douglas petitioned for a writ of
mandamus.
Analysis
Because a writ of mandamus is an extraordinary remedy, we have developed
five factors that cabin our power to grant the writ:
1. “The party seeking the writ has no other adequate means, such as a direct
appeal, to attain the relief he or she desires.”
2. “The petitioner will be damaged or prejudiced in a way not correctable on
appeal.”
3. “The district court's order is clearly erroneous as a matter of law.”
4. “The district court's order is an oft-repeated error, or manifests a persistent
disregard of the federal rules.”
5. “The district court's order raises new and important problems, or issues of law
of first impression.”
Bauman v. U.S. Dist. Court, 557 F.2d 650, 654-55 (9th Cir.1977).
The third factor is a necessary condition for granting a writ of mandamus.
Executive Software N. Am., Inc. v. U.S. Dist. Court, 24 F.3d 1545, 1551 (9th
Cir.1994). But “all five factors need not be satisfied at once.” Valenzuela-Gonzalez
v. U.S. Dist. Court, 915 F.2d 1276, 1279 (9th Cir.1990). If the district court clearly
erred, we determine whether the four additional factors “in the mandamus calculus
point in favor of granting the writ.” Executive Software, 24 F.3d at 1551.
161
1. Douglas alleges that Talk America changed his service contract without
notifying him. He could only have become aware of the new terms if he had visited
Talk America's website and examined the contract for possible changes. The district
court seems to have assumed Douglas had visited the website when it noted that
the contract was available on “the web site on which Plaintiff paid his bills.”
However, Douglas claims that he authorized AOL to charge his credit card
automatically and Talk America continued this practice, so he had no occasion to
visit Talk America's website to pay his bills. Even if Douglas had visited the website,
he would have had no reason to look at the contract posted there. Parties to a
contract have no obligation to check the terms on a periodic basis to learn whether
they have been changed by the other side.FN1 Indeed, a party can't unilaterally
change the terms of a contract; it must obtain the other party's consent before
doing so. Union Pac. R.R. v. Chi., Milwaukee, St. Paul & Pac. R.R., 549 F.2d 114,
118 (9th Cir.1976). This is because a revised contract is merely an offer and does
not bind the parties until it is accepted. Matanuska Val Farmers Cooperating Ass'n
v. Monaghan, 188 F.2d 906, 909 (9th Cir.1951). And generally “an offeree cannot
actually assent to an offer unless he knows of its existence.” 1 Samuel Williston &
Richard A. Lord, A Treatise on the Law of Contracts § 4:13, at 365 (4th ed.1990);
see also Trimble v. N.Y. Life Ins. Co., 234 A.D. 427, 255 N.Y.S. 292, 297 (1932)
(“An offer may not be accepted until it is made and brought to the attention of the
one accepting.”). Even if Douglas's continued use of Talk America's service could be
considered assent, such assent can only be inferred after he received proper notice
of the proposed changes. Douglas claims that no such notice was given.
FN1. Nor would a party know when to check the website for possible changes
to the contract terms without being notified that the contract has been
changed and how. Douglas would have had to check the contract every day
for possible changes. Without notice, an examination would be fairly
cumbersome, as Douglas would have had to compare every word of the
posted contract with his existing contract in order to detect whether it had
changed.
Crawford v. Talk America, Inc., No. 05-CV-0180-DRH, 2005 WL 2465909, at *4
(S.D.Ill. Oct. 6, 2005), and Bischoff v. DirecTV, Inc., 180 F.Supp.2d 1097, 1103-06
(C.D.Cal.2002), on which the district court relied, are not to the contrary. The
customers in these cases received notice of the modified contract by mail. The
service provider in Bischoff mailed the contract to the customer, 180 F.Supp.2d at
1101, and the service provider in Crawford gave notice to the customer that she
could see the contract terms online or call the service provider to learn of the
terms. 2005 WL 2465909, at *3 n. 3. Furthermore, Crawford*1067 and Bischoff
involved new customers who necessarily would be on notice that they were
required to assent to contract terms as a predicate for using the service. By
contrast, the California Court of Appeal has held that a revised contract containing
an arbitration clause is unenforceable against existing customers, even when they
are given notice by mail. Badie v. Bank of Am., 67 Cal.App.4th 779, 801, 79
Cal.Rptr.2d 273 (1998).
162
The district court thus erred in holding that Douglas was bound by the terms of
the revised contract when he was not notified of the changes. The error reflects
fundamental misapplications of contract law and goes to the heart of petitioner's
claim. It would alone be sufficient to satisfy the third Bauman factor, but the district
court also committed two additional errors. Even if Douglas were bound by the new
terms of the contract (which he is not for the reasons already explained), the new
terms probably would not be enforceable in California because they conflict with
California's fundamental policy as to unconscionable contracts.FN2 In New York, as in
California, a contract is unconscionable only if it is both procedurally and
substantively unconscionable. See Armendariz v. Found. Health Psychcare Servs.,
Inc., 24 Cal.4th 83, 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000); Gillman v. Chase
Manhattan Bank, N.A., 73 N.Y.2d 1, 10, 537 N.Y.S.2d 787, 534 N.E.2d 824 (1988).
That's where the similarities end. The district court erred in analyzing California law
as to both procedural and substantive unconscionability.
FN2. Under the Federal Arbitration Act (FAA), 9 U.S.C. § 2, “[a]rbitration
agreements ... are subject to all defenses to enforcement that apply to
contracts generally.” Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170
(9th Cir.2003). Thus, “[t]o evaluate the validity of an arbitration agreement,
federal courts ‘should apply ordinary state-law principles that govern the
formation of contracts.’ ” Id. (quoting First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). Such
state-law principles come from the law of a particular state-not federal
general common law under the FAA. See First Options, 514 U.S. at 944, 115
S.Ct. 1920. Here, Douglas has raised the state law defenses of lack of
contract formation and unconscionability, so we must determine which
state's law applies.
The FAA “does not create any independent federal-question jurisdiction.”
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32,
103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The district court exercised
supplemental jurisdiction in this case. When a federal court exercises
supplemental jurisdiction, “the federal court applies the choice-of-law rules
of the forum state,” which in this case is California. Paracor Fin., Inc. v.
Gen. Elec. Capital Corp., 96 F.3d 1151, 1164 (9th Cir.1996).
Under California's choice-of-law rules, the district court may not enforce the
choice-of-law provision pointing to New York law if (1) New York's
substantive law is contrary to a fundamental policy entrenched in
California's substantive law and (2) California has a “materially greater
interest” than New York in determining the issue. Wash. Mut. Bank, FA v.
Superior Court, 24 Cal.4th 906, 916-17, 103 Cal.Rptr.2d 320, 15 P.3d 1071
(2001) (quoting Restatement (Second) of Conflict of Laws § 187(2)). To
determine which state has the materially greater interest, we look to the
domicile of the parties and the place of the wrong. See Reich v. Purcell, 67
Cal.2d 551, 555, 63 Cal.Rptr. 31, 432 P.2d 727 (1967). California certainly
has an interest in protecting the thousands of citizens in the California
subclass of this class action from unconscionable contracts. And this
163
interest is materially greater than New York's interest because Talk America
is a Pennsylvania corporation with its principal place of business in
Pennsylvania. Therefore, if New York law conflicts with a fundamental policy
of California, the choice-of-law provision cannot be enforced and California
law would apply.
The district court held that the arbitration clause in the modified contract is not
procedurally unconscionable (and therefore enforceable) because Douglas had
meaningful alternative choices for telephone service. Under New York law this
choice forecloses any procedural unconscionability claim. See Ranieri v. Bell Atl.
Mobile, 304 A.D.2d 353, 759 N.Y.S.2d 448, 449 (2003). However, after the district
court made its ruling, we noted that California “has rejected the notion that the
availability ... of substitute ... services alone can defeat a claim of procedural
unconscionability.” Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1283 (9th
Cir.2006) (en banc). In California, a contract can be procedurally unconscionable if
a service provider has overwhelming bargaining power and presents a “take-it-orleave-it” contract to a customer-even if the customer has a meaningful choice as to
service providers. Id. at 1284.
Likewise, the district court held that the class action waiver provision is not
substantively unconscionable. Such waivers aren't substantively unconscionable
under New York law. See Hayes v. County Bank, 26 A.D.3d 465, 811 N.Y.S.2d 741,
743 (2006); Tsadilas v. Providian Nat'l Bank, 13 A.D.3d 190, 786 N.Y.S.2d 478,
480 (App.Div.2004); Ranieri, 759 N.Y.S.2d at 449. The district court cited
Provencher v. Dell, Inc., 409 F.Supp.2d 1196, 1201 (C.D.Cal.2006), for the
proposition that California law was in accord, but the California Court of Appeal in
Cohen v. DirecTV, Inc., 142 Cal.App.4th 1442, 1455 n. 13, 48 Cal.Rptr.3d 813
(Ct.App.2006), expressly disavowed Provencher. A class action waiver provision
thus may be unconscionable in California. Whether it is depends on the facts and
circumstances developed during the course of litigation. The district court clearly
erred in holding that the clauses (assuming that they are part of the contract at all)
are consistent with California policy and therefore enforceable as a matter of law.
Because we find that the district court committed clear errors of law, we turn to
the remaining four Bauman factors.
2. The first and second Bauman factors weigh in favor of granting mandamus
relief.FN3 If Douglas is forced to arbitrate, he “has no other adequate means” of
ensuring that he can continue as the class representative. Bauman, 557 F.2d at
654. This would “prejudice [ ]” Douglas “in a way not correctable on appeal.” Id.
FN3. We generally examine the first and second factors together. See
Bauman, 557 F.2d at 654 (the second factor “is closely related to the first”).
If Douglas wins the arbitration and is awarded all the damages he asks for, then
his individual claim would be rendered moot.FN4 Douglas couldn't avoid mootness by
moving to vacate the arbitration award solely because he wanted to continue as the
class representative. There are only four permissible grounds for vacating an
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arbitration award: (1) “the award was procured by corruption, fraud, or undue
means”; (2) “there was evident partiality or corruption in the arbitrators”; (3) the
arbitrators “refus[ed] to postpone the hearing” even when there was sufficient
cause to postpone, “refus[ed] to hear evidence pertinent and material to the
controversy” or engaged in “other misbehavior”; and (4) “where the arbitrators
exceeded their powers.” 9 U.S.C. § 10(a). In sum, a party needs to show
“affirmative misconduct” or “irrational[ity]” in the arbitration to vacate an
arbitration award. Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d
987, 998 (9th Cir.2003) (en banc). Losing the opportunity to continue as a class
representative doesn't come close to meeting this standard.
FN4. If Douglas were to lose the arbitration or were awarded less than he
seeks, his claim would not be moot, as he would be able to challenge the
district court's order compelling arbitration as part of his appeal of the
arbitration award. See Sanford v. MemberWorks, Inc., 483 F.3d 956, 960
(9th Cir.2007) (reversing a district court's order compelling arbitration when
the plaintiff received an arbitration award on a restitution claim but “[t]he
arbitrator found for [defendant] on [plaintiff's] other claims”).
If Douglas's individual claim is rendered moot because it is fully satisfied as a
result of the arbitration, he would lose his status as class representative because he
would no longer have a concrete stake in the controversy. It is also doubtful that he
could appeal the district court's order confirming an award that fully satisfied his
individual claim, and he would thus have no opportunity to challenge the district
court's order compelling the arbitration in the first place. It is thus entirely possible
that the district court's clear error in compelling arbitration would be insulated from
appellate review. Bauman, 557 F.2d at 654.
3. The fifth Bauman factor also favors mandamus relief. The district court's
order enforcing new contractual terms when a customer is only given notice of the
terms by having the contract posted on the internet “raises new and important
problems” and addresses “issues of law of first impression.” Bauman, 557 F.2d at
655. This is the first time any federal court of appeals has considered whether to
enforce a modified contract with a customer where the customer claims that the
only notice of the changed terms consisted of posting the revised contract on the
provider's website. This issue is also of some significance, as it potentially affects
the relationship of numerous service providers with millions of customers, and thus
deserves immediate resolution.
***
Because four of the five Bauman factors favor mandamus relief, and only one
factor (the fourth) militates against it, we conclude that the balance of factors
favors issuing the writ. The district court's order compelling arbitration is vacated.
Steven J. Caspi v. The Microsoft Network, L.L.C., and Microsoft Corporation
SUPERIOR COURT OF NEW JERSEY, APPELLATE DIVISION
165
323 N.J. Super. 118; 732 A.2d 528
July 2, 1999, Decided
KESTIN, J.A.D.
We are here called upon to determine the validity and enforceability of a forum
selection clause contained in an on-line subscriber agreement of the Microsoft
Network (MSN), an on-line computer service. The trial court granted defendants'
motion to dismiss the complaint on the ground that the forum selection clause in
the parties' contracts called for plaintiffs' claims to be litigated in the State of
Washington. Plaintiffs appeal. We affirm.
The amended class action complaint in eighteen counts sought divers relief
against two related corporate entities, The Microsoft Network, L.L.C. and Microsoft
Corporation (collectively, Microsoft). Plaintiffs asserted various theories including
breach of contract, common law fraud, and consumer fraud in the way Microsoft
had "rolled over" MSN membership into more expensive plans. Among the claims
was an accusation that Microsoft had engaged in "unilateral negative option billing,"
a practice condemned by the attorneys general of twenty-one states, including New
Jersey's, with regard to a Microsoft competitor, America Online, Inc. Under the
practice as alleged, Microsoft, without notice to or permission from MSN members,
unilaterally charged them increased membership fees attributable to a change in
service plans.
The four named plaintiffs are members of MSN. Two reside in New Jersey; the
others in Ohio and New York. Purporting to represent a nationwide class of 1.5
million similarly aggrieved MSN members, plaintiffs, in May 1997, moved for multistate class action certification.
Shortly thereafter, defendants moved to dismiss the amended complaint for lack
of jurisdiction and improper venue by reason of the forum selection clause which,
defendants contended, was in every MSN membership agreement and bound all the
named plaintiffs and all members of the class they purported to represent. That
clause, paragraph 15.1 of the MSN membership agreement, provided:
This agreement is governed by the laws of the State of Washington, USA,
and you consent to the exclusive jurisdiction and venue of courts in King
County, Washington in all disputes arising out of or relating to your use of
MSN or your MSN membership.
Plaintiffs cross-moved, inter alia, to strike a certification submitted in support of
defendants' motion to dismiss and to compel the deposition of the certificant.
On November 13, 1997, Judge Fitzpatrick, in a written opinion, expressed his
reasons for dismissing the complaint based upon the forum selection clause. Given
that conclusion, plaintiffs' cross-motions were denied perforce, and plaintiffs'
motion to certify the class was denied as moot. Conforming orders were entered on
the same date. On December 19, 1997, Judge Fitzpatrick entered an order
modifying a passage in his November 13 opinion.
The background of the matter was depicted in the amended opinion:
166
Before becoming an MSN member, a prospective subscriber is prompted by
MSN software to view multiple computer screens of information, including a
membership agreement which contains the above clause. MSN's membership
agreement appears on the computer screen in a scrollable window next to
blocks providing the choices "I Agree" and "I Don't Agree." Prospective
members assent to the terms of the agreement by clicking on "I Agree" using
a computer mouse. Prospective members have the option to click "I Agree"
or "I Don't Agree" at any point while scrolling through the agreement.
Registration may proceed only after the potential subscriber has had the
opportunity to view and has assented to the membership agreement,
including MSN's forum selection clause. No charges are incurred until after
the membership agreement review is completed and a subscriber has clicked
on "I Agree."
The trial court observed:
Generally, forum selection clauses are prima facie valid and enforceable in New
Jersey. See McNeill v. Zoref, 297 N.J. Super. 213, 687 A.2d 1052 (App. Div.
1997). New Jersey courts will decline to enforce a clause only if it fits into one of
three exceptions to the general rule: (1) the clause is a result of fraud or
"overweening" bargaining power; (2) enforcement would violate the strong
public policy of New Jersey; or (3) enforcement would seriously inconvenience
trial. Wilfred MacDonald, Inc. v. Cushman, Inc., 256 N.J. Super. 58, 606 A.2d
407 (App. Div.), certif. denied, 130 N.J. 17 (1992). The burden falls on the party
objecting to enforcement to show that the clause in question fits within one of
these exceptions. Id. Plaintiffs have failed to meet that burden here. . . .
[The defendants argued that each of the exceptions applied in this case; the both
the trial and appeals courts rejected these arguments; the appeals court then
turned to the question of whether the presentation of the MSN's membership
agreement via a computer screen meant that the plaintiff’s lacked noticed of the
forum selection clause.]
The only viable issues that remain bear upon the argument that plaintiffs did not
receive adequate notice of the forum selection clause, and therefore that the clause
never became part of the membership contract which bound them. A related,
alternative argument is that the question of notice is a factual matter that should
be submitted to a jury. Defendants respond by arguing that 1) in the absence of
fraud, a contracting party is bound by the provisions of a form contract even if he
or she never reads them; 2) this clause met all reasonable standards of
conspicuousness; and 3) the sign-up process gave plaintiffs ample opportunity to
review and reject the agreement. Defendants also contend that notice is a question
of law, decidable by a court, not a jury.
The holding in Carnival Cruise Lines v. Shute, 499 U.S. 585, 111 S. Ct. 1522,
113 L. Ed. 2d 622 (1991), does not dispose of the notice question because the
plaintiffs there had "essentially ... conceded that they had notice of the forumselection provision[,]" by stating that they "'[did] not contest ... that the forum
167
selection clause was reasonably communicated to [them], as much as three pages
of fine print can be communicated.'" Id. at 590, 111 S. Ct. at 1525, 113 L. Ed. 2d
at 630. The dissenting justices described the format in which the forum selection
clause had been presented as "in the fine print on the back of the [cruise] ticket."
Id. at 597, 111 S. Ct. at 1529, 113 L. Ed. 2d at 634 (Stevens, J., dissenting).
The scenario presented here is different because of the medium used, electronic
versus printed; but, in any sense that matters, there is no significant distinction.
The plaintiffs in Carnival could have perused all the fine-print provisions of their
travel contract if they wished before accepting the terms by purchasing their cruise
ticket. The plaintiffs in this case were free to scroll through the various computer
screens that presented the terms of their contracts before clicking their agreement.
Also, it seems clear that there was nothing extraordinary about the size or
placement of the forum selection clause text. By every indication we have, the
clause was presented in exactly the same format as most other provisions of the
contract. It was the first item in the last paragraph of the electronic document. We
note that a few paragraphs in the contract were presented in upper case typeface,
presumably for emphasis, but most provisions, including the forum selection clause,
were presented in lower case typeface. We discern nothing about the style or mode
of presentation, or the placement of the provision, that can be taken as a basis for
concluding that the forum selection clause was proferred unfairly, or with a design
to conceal or de-emphasize its provisions. To conclude that plaintiffs are not bound
by that clause would be equivalent to holding that they were bound by no other
clause either, since all provisions were identically presented. Plaintiffs must be
taken to have known that they were entering into a contract; and no good purpose,
consonant with the dictates of reasonable reliability in commerce, would be served
by permitting them to disavow particular provisions or the contracts as a whole.
See Rudbart v. North Jersey Dist. Water Supply Comm'n, 127 N.J. 344, 351-53,
605 A.2d 681 (referring to the principle that a contracting party may be bound by
the terms of a form contract even if he or she has never read them), cert. denied,
506 U.S. 871, 113 S. Ct. 203, 121 L. Ed. 2d 145 (1992).
The issue of reasonable notice regarding a forum selection clause is a question
of law for the court to determine. See Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 9
(2d Cir. 1995); Hodes v. S.N.C. Achille Lauro Ed Altri-Gestione, 858 F.2d 905, 908
(3d Cir. 1988), petition for cert. dismissed, 490 U.S. 1001, 109 S. Ct. 1633, 104 L.
Ed. [***14] 2d 149 (1989), abrogated in other grounds, Lauro Lines, S.R.L. v.
Chasser, 490 U.S. 495, 109 S. Ct. 1976, 104 L. Ed. 2d 548 (1989). We agree with
the trial court that, in the absence of a better showing than has been made,
plaintiffs must be seen to have had adequate notice of the forum selection clause.
The resolution of this notice issue, at this stage of the litigation between plaintiffs
and defendants must, of course, be seen to be without prejudice to any showing
either party may have the opportunity to make in another jurisdiction in a plenary
proceeding on the contract regarding issues apart from the validity and
enforceability of the forum selection clause.
Affirmed.
168
Notes and Questions
In Capsi, it was clear, from the presentation of the MSN membership
agreement, (1) that the plaintiffs were being invited to enter a contractual
relationship, which was (2) readily accessible, and which (3) could be accepted or
rejected by performing or refraining from an affirmative act of agreement (clicking
the button). There are contracting practices that depart from this affirmative-actof-agreement paradigm.
To what extent may one depart from this paradigm and still form a binding
contractual agreement? The next case, ProCd v. Zeidenberg, raises this question.
The case concerns “shrinkwrap” licenses. “Shrinkwrap” refers to practice of
packaging many consumer goods in a tight-fitting plastic film, called shrinkwrap
(the plastic film shrinks when heated; this is how the tight-fit is achieved). In
ProCD, Zeidenberg purchase software contained inside a shrinkwraped box; a
software license was also included inside the box, and hence could not be viewed
until the box was purchased and opened. This departs from the affirmative-act-ofagreement paradigm above. The contract is not accessible until after purchase.
Does this fact mean the license agreement is unenforceable?
Note on terminology: ProCd v. Zeidenberg has been very influential, and its
“shrink wrap” terminology has been widely adopted and extended. Thus, contracts
in which assent is indicated by clicking on a button—as illustrated by Caspi—are
sometimes called “click wrap” contracts.
ProCD v. Zeidenberg (Part 2)
86 F.3d 1447, (1996)
EASTERBROOK, Circuit Judge. . . .
III
The district court held that, even if Wisconsin treats shrinkwrap licenses as
contracts, § 301(a) of the Copyright Act, 17 U.S.C. § 301(a), prevents their
enforcement. 908 F. Supp. at 656-59. The relevant part of § 301(a) preempts any
"legal or equitable rights [under state law] that are equivalent to any of the
exclusive rights within the general scope of copyright as specified by section 106 in
works of authorship that are fixed in a tangible medium of expression and come
within the subject matter of copyright as specified by sections 102 and 103".
If a federal statute preempts a state law, the state law is unenforceable. See the
tutorial on preemption for details.
ProCD's software and data are "fixed in a tangible medium of expression", and the
district judge held that they are "within the subject matter of copyright". The latter
conclusion is plainly right for the copyrighted application program, and the judge
thought that the data likewise are "within the subject matter of copyright" even if,
169
after Feist, they are not sufficiently original to be copyrighted. . . . One function of
§ 301(a) is to prevent states from giving special protection to works of authorship
that Congress has decided should be in the public domain, which it can accomplish
only if "subject matter of copyright" includes all works of a type covered by sections
102 and 103, even if federal law does not afford protection to them. . . .
But are rights created by contract "equivalent to any of the exclusive rights
within the general scope of copyright"? Three courts of appeals have answered
"no." National Car Rental Systems, Inc. v. Computer Associates International, Inc.,
991 F.2d 426, 433 (8th Cir. 1993); Taquino v. Teledyne Monarch Rubber, 893 F.2d
1488, 1501 (5th Cir. 1990); Acorn Structures, Inc. v. Swantz, 846 F.2d 923, 926
(4th Cir. 1988). The district court disagreed with these decisions, 908 F. Supp. at
658, but we think them sound. Rights "equivalent to any of the exclusive rights
within the general scope of copyright" are rights established by law—rights that
restrict the options of persons who are strangers to the author. Copyright law
forbids duplication, public performance, and so on, unless the person wishing to
copy or perform the work gets permission; silence means a ban on copying. A
copyright is a right against the world. Contracts, by contrast, generally affect only
their parties; strangers may do as they please, so contracts do not create
"exclusive rights." Someone who found a copy of SelectPhone (trademark) on the
street would not be affected by the shrinkwrap license—though the federal
copyright laws of their own force would limit the finder's ability to copy or transmit
the application program.
The claim is that a right created by contract with regard to copyright material would
be “equivalent” to a right established by the copyright statute only when the
following was true: the contract created a right against everyone, not just against
parties to the contract.
(a) True
(b) False
Think for a moment about trade secrets. One common trade secret is a
customer list. After Feist, a simple alphabetical list of a firm's customers, with
address and telephone numbers, could not be protected by copyright. Yet Kewanee
Oil Co. v. Bicron Corp., 416 U.S. 470, 40 L. Ed. 2d 315, 94 S. Ct. 1879 (1974),
holds that contracts about trade secrets may be enforced—precisely because they
do not affect strangers' ability to discover and use the information independently.
Since contracts about trade secrets do not affect strangers' ability to discover and
use the information independently,” they are not equivalent to rights created by the
copyright statute.
(a) Yes
(b) No
If the amendment of § 301(a) in 1976 overruled Kewanee and abolished
consensual protection of those trade secrets that cannot be copyrighted, no one has
noticed—though abolition is a logical consequence of the district court's approach.
Think, too, about everyday transactions in intellectual property. A customer visits a
video store and rents a copy of Night of the Lepus. The customer's contract with the
170
store limits use of the tape to home viewing and requires its return in two days.
May the customer keep the tape, on the ground that § 301(a) makes the promise
unenforceable?
A law student uses the LEXIS database, containing public-domain
documents, under a contract limiting the results to educational endeavors; may the
student resell his access to this database to a law firm from which LEXIS seeks to
collect a much higher hourly rate? Suppose ProCD hires a firm to scour the nation
for telephone directories, promising to pay $ 100 for each that ProCD does not
already have. The firm locates 100 new directories, which it sends to ProCD with an
invoice for $ 10,000. ProCD incorporates the directories into its database; does it
have to pay the bill? Surely yes; Aronson v. Quick Point Pencil Co., 440 U.S. 257,
59 L. Ed. 2d 296, 99 S. Ct. 1096 (1979), holds that promises to pay for intellectual
property may be enforced even though federal law (in Aronson, the patent law)
offers no protection against third-party uses of that property. See also Kennedy v.
Wright, 851 F.2d 963 (7th Cir. 1988). But these illustrations are what our case is
about. ProCD offers software and data for two prices: one for personal use, a higher
price for commercial use. Zeidenberg wants to use the data without paying the
seller's price; if the law student and Quick Point Pencil Co. could not do that,
neither can Zeidenberg.
Although Congress possesses power to preempt even the enforcement of
contracts about intellectual property . . . courts usually read preemption clauses to
leave private contracts unaffected. American Airlines, Inc. v. Wolens, 130 L. Ed. 2d
715, 115 S. Ct. 817 (1995), provides a nice illustration. A federal statute preempts
any state "law, rule, regulation, standard, or other provision ... relating to rates,
routes, or services of any air carrier." 49 U.S.C. App. § 1305(a)(1). Does such a
law preempt the law of contracts--so that, for example, an air carrier need not
honor a quoted price (or a contract to reduce the price by the value of frequent
flyer miles)? The Court allowed that it is possible to read the statute that broadly
but thought such an interpretation would make little sense. Terms and conditions
offered by contract reflect private ordering, essential to the efficient functioning of
markets. 115 S. Ct. at 824-25. Although some principles that carry the name of
contract law are designed to defeat rather than implement consensual transactions,
id. at 826 n.8, the rules that respect private choice are not preempted by a clause
such as § 1305(a)(1). Section 301(a) plays a role similar to § 1301(a)(1): it
prevents states from substituting their own regulatory systems for those of the
national government. Just as § 301(a) does not itself interfere with private
transactions in intellectual property, so it does not prevent states from respecting
those transactions. Like the Supreme Court in Wolens, we think it prudent to refrain
from adopting a rule that anything with the label "contract" is necessarily outside
the preemption clause: the variations and possibilities are too numerous to foresee.
National Car Rental likewise recognizes the possibility that some applications of the
law of contract could interfere with the attainment of national objectives and
therefore come within the domain of § 301(a). But general enforcement of
shrinkwrap licenses of the kind before us does not create such interference.
Aronson emphasized that enforcement of the contract between Aronson and
Quick Point Pencil Company would not withdraw any information from the public
domain. That is equally true of the contract between ProCD and Zeidenberg.
Everyone remains free to copy and disseminate all 3,000 telephone books that have
171
been incorporated into ProCD's database. Anyone can add sic codes and zip codes.
ProCD's rivals have done so. Enforcement of the shrinkwrap license may even make
information more readily available, by reducing the price ProCD charges to
consumer buyers. To the extent licenses facilitate distribution of object code while
concealing the source code (the point of a clause forbidding disassembly), they
serve the same procompetitive functions as does the law of trade secrets. Rockwell
Graphic Systems, Inc. v. DEV Industries, Inc., 925 F.2d 174, 180 (7th Cir. 1991).
Licenses may have other benefits for consumers: many licenses permit users to
make extra copies, to use the software on multiple computers, even to incorporate
the software into the user's products. But whether a particular license is generous
or restrictive, a simple two-party contract is not "equivalent to any of the exclusive
rights within the general scope of copyright" and therefore may be enforced.
REVERSED AND REMANDED
United States District Court,
S.D. New York.
Christopher Specht v. Netscape Communications Corp
Nos. 00 CIV. 4871(AKH), 00 CIV. 6219(AKH), 00 CIV. 6249(AKH).
July 5, 2001.
MEMORANDUM AND ORDER DENYING MOTION TO COMPEL ARBITRATION
AND STAY
PROCEEDINGS
Hellerstein, District Judge.
Promises become binding when there is a meeting of the minds and
consideration is exchanged. So it was at King's Bench in common law England; so
it was under the common law in the American colonies; so it was through more
than two centuries of jurisprudence in this country; and so it is today. Assent may
be registered by a signature, a handshake, or a click of a computer mouse
transmitted across the invisible ether of the Internet. Formality is not a requisite;
any sign, symbol or action, or even willful inaction, as long as it is unequivocally
referable to the promise, may create a contract.
The three related cases before me all involve this timeless issue of assent,
but in the context of free software offered on the Internet. If an offeree downloads
free software, and the offeror seeks a contractual understanding limiting its uses
and applications, under what circumstances does the act of downloading create a
contract? On the facts presented here, is there the requisite assent and
consideration? My decision focuses on these issues.
172
In these putative class actions, Plaintiffs allege that usage of the software
transmits to Defendants private information about the user's file transfer activity on
the Internet, thereby effecting an electronic surveillance of the user's activity in
violation of two federal statutes, the Electronic Communications Privacy Act, 18
U.S.C. § 2510 et seq., and the Computer Fraud and Abuse Act, 18 U.S.C. § 1030.
Defendants move to compel arbitration and stay the proceedings, arguing that the
disputes reflected in the Complaint, like all others relating to use of the software,
are subject to a binding arbitration clause in the End User License Agreement
("License Agreement"), the contract allegedly made by the offeror of the software
and the party effecting the download. Thus, I am asked to decide if an offer of a
license agreement, made independently of freely offered software and not expressly
accepted by a user of that software, nevertheless binds the user to an arbitration
clause contained in the license.
I. Factual and Procedural Background
Defendant Netscape, [FN2] a provider of computer software programs that
enable and facilitate the use of the Internet, offers its "SmartDownload" software
free of charge on its web site to all those who visit the site and indicate, by clicking
their mouse in a designated box, that they wish to obtain it. SmartDownload is a
program that makes it easier for its users to download files from the Internet
without losing their interim progress when they pause to engage in some other
task, or if their Internet connection is severed. Four of the six named Plaintiffs-John Gibson, Mark Gruber, Sean Kelly and Sherry Weindorf--selected and clicked in
the box indicating a decision to obtain the software, and proceeded to download the
software on to the hard drives of their computers. The fifth named Plaintiff,
Michael Fagan, allegedly downloaded the software from a "shareware" [FN3] web
site operated by a third party. The sixth named Plaintiff, Christopher Specht,
never obtained or used SmartDownload, but merely maintained a web site from
which other individuals could download files. [FN4]
FN2. Defendant American Online, Inc. ("AOL") is Defendant Netscape's
corporate parent.
FN3. Various companies and individuals maintain "shareware" web sites
containing libraries of free, publicly available software. The ZDNet site
library included SmartDownload. The pages that a user would see in
downloading SmartDownload from ZDNet, however, differ from the pages
that a user would see in downloading SmartDownload directly from the
Netscape web site. Notably, there is no reference to the License Agreement
on the ZDNet pages, merely a hypertext link to "more information" about
SmartDownload, which, if clicked, takes the user to a Netscape web page
which, in turn, contains a link to the License Agreement. In other words, an
individual could obtain SmartDownload from ZDNet without ever seeing a
reference to the License Agreement, even if he or she viewed all of ZDNet's
web pages.
173
FN4. As discussed infra, Defendants contend that because other individuals
could use SmartDownload to facilitate their downloading of files from
Specht's web site, Specht is a third-party beneficiary of the License
Agreement.
Visitors wishing to obtain SmartDownload from Netscape's web site arrive at
a page pertaining to the download of the software. On this page, there appears a
tinted box, or button, labeled "Download." By clicking on the box, a visitor
initiates the download. The sole reference on this page to the License Agreement
appears in text that is visible only if a visitor scrolls down through the page to the
next screen. If a visitor does so, he or she sees the following invitation to review
the License Agreement:
Please review and agree to the terms of the Netscape SmartDownload
software license agreement before downloading and using the
software.
Visitors are not required affirmatively to indicate their assent to the License
Agreement, or even to view the license agreement, before proceeding with a
download of the software. But if a visitor chooses to click on the underlined text in
the invitation, a hypertext link takes the visitor to a web page entitled "License &
Support Agreements." The first paragraph on this page reads in pertinent part:
The use of each Netscape software product is governed by a license
agreement. You must read and agree to the license agreement terms
BEFORE acquiring a product. Please click on the appropriate link
below to review the current license agreement for the product of
interest to you before acquisition. For products available for
download, you must read and agree to the license agreement terms
BEFORE you install the software. If you do not agree to the license
terms, do not download, install or use the software.
Below the paragraph appears a list of license agreements, the first of which is
"License Agreement for Netscape Navigator and Netscape Communicator Product
Family (Netscape Navigator, Netscape Communicator and Netscape
SmartDownload)." If the visitor then clicks on that text, he or she is brought to
another web page, this one containing the full text of the License Agreement.
The License Agreement, which has been unchanged throughout the period that
Netscape has made SmartDownload available to the public, grants the user a
license to use and reproduce SmartDownload, and otherwise contains few
restrictions on the use of the software. The first paragraph of the License
Agreement describes, in upper case print, the purported manner in which a user
accepts or rejects its terms.
BY CLICKING THE ACCEPTANCE BUTTON OR INSTALLING OR USING
NETSCAPE COMMUNICATOR, NETSCAPE NAVIGATOR, OR NETSCAPE
174
SMARTDOWNLOAD SOFTWARE (THE "PRODUCT"), THE INDIVIDUAL
OR ENTITY LICENSING THE PRODUCT ("LICENSEE") IS CONSENTING
TO BE BOUND BY AND IS BECOMING A PARTY TO THIS AGREEMENT.
IF LICENSEE DOES NOT AGREE TO ALL OF THE TERMS OF THIS
AGREEMENT, THE BUTTON INDICATING NON-ACCEPTANCE MUST BE
SELECTED, AND LICENSEE MUST NOT INSTALL OR USE THE
SOFTWARE.
The License Agreement also contains a term requiring that virtually all
disputes be submitted to arbitration in Santa Clara County, California.
Unless otherwise agreed in writing, all disputes relating to this
Agreement (excepting any dispute relating to intellectual property
rights) shall be subject to final and binding arbitration in Santa Clara
County, California, under the auspices of JAMS/EndDispute, with the
losing party paying all costs of arbitration.
All users of SmartDownload must use it in connection with Netscape's
Internet browser, which may be obtained either as an independent product,
Netscape Navigator, or as part of a suite of software, Netscape Communicator.
Navigator and Communicator are governed by a single license agreement, which is
identical to the License Agreement for SmartDownload. By its terms, the
Navigator / Communicator license is limited to disputes "relating to this
Agreement."
II. Applicable Law
. . . First, I must determine whether the parties entered into a binding contract.
Only if I conclude that a contract exists do I proceed to a second stage of analysis:
interpretation of the arbitration clause and its applicability to the present case.
The first stage of the analysis--whether a contract was formed--is a question of
state law. If, under the law, a contract is formed, the interpretation of the scope of
an arbitration clause in the contract is a question of federal law. . . .
[The court determines that California law applies to the question of whether a
contract was formed.]
III. Did Plaintiffs Consent to Arbitration?
Unless the Plaintiffs agreed to the License Agreement, they cannot be bound
by the arbitration clause contained therein. My inquiry, therefore, focuses on
whether the Plaintiffs, through their acts or failures to act, manifested their assent
to the terms of the License Agreement proposed by Defendant Netscape. More
specifically, I must consider whether the web site gave Plaintiffs sufficient notice of
the existence and terms of the License Agreement, and whether the act of
downloading the software sufficiently manifested Plaintiffs' assent to be bound by
175
the License Agreement. I will address separately the factually distinct
circumstances of Plaintiffs Michael Fagan and Christopher Specht.
In order for a contract to become binding, both parties must assent to be
bound. "[C]ourts have required that assent to the formation of a contract be
manifested in some way, by words or other conduct, if it is to be effective." E.
Allan Farnsworth, Farnsworth on Contracts § 3.1 (2d ed.2000). "To form a
contract, a manifestation of mutual assent is necessary. Mutual assent may be
manifested by written or spoken words, or by conduct." Binder v. Aetna Life Ins.
Co., 75 Cal.App.4th 832, 850, 89 Cal.Rptr.2d 540, 551 (Cal.Ct.App.1999) (citations
omitted). "A contract for sale of goods may be made in any manner sufficient to
show agreement, including conduct by both parties which recognizes the existence
of such a contract." Cal. Com.Code § 2204.
These principles enjoy continuing vitality in the realm of software licensing.
The sale of software, in stores, by mail, and over the Internet, has resulted in
several specialized forms of license agreements. For example, software commonly
is packaged in a container or wrapper that advises the purchaser that the use of the
software is subject to the terms of a license agreement contained inside the
package. The license agreement generally explains that, if the purchaser does not
wish to enter into a contract, he or she must return the product for a refund, and
that failure to return it within a certain period will constitute assent to the license
terms. These so-called "shrink-wrap licenses" have been the subject of
considerable litigation.
In ProCD, Inc. v. Zeidenberg, for example, the Seventh Circuit Court of
Appeals considered a software license agreement "encoded on the CD-ROM disks as
well as printed in the manual, and which appears on a user's screen every time the
software runs." 86 F.3d 1447, 1450 (7th Cir.1996). The absence of contract
terms on the outside of the box containing the software was not material, since
"[e]very box containing [the software] declares that the software comes with
restrictions stated in an enclosed license." Id. The court accepted that placing all of
the contract terms on the outside of the box would have been impractical, and held
that the transaction, even though one "in which the exchange of money precedes
the communication of detailed terms," was valid, in part because the software could
not be used unless and until the offeree was shown the license and manifested his
assent. Id. at 1451-52.
A vendor, as master of the offer, may invite acceptance by conduct, and may
propose limitations on the kind of conduct that constitutes acceptance. A
buyer may accept by performing the acts the vendor proposes to treat as
acceptance. And that is what happened. ProCD proposed a contract that a
buyer would accept by using the software after having an opportunity to read
the license at leisure. This Zeidenberg did. He had no choice, because the
software splashed the license on the screen and would not let him proceed
without indicating acceptance.
176
Id. at 1452 (emphasis added). The court concluded that "[s]hrinkwrap licenses
are enforceable unless their terms are objectionable on grounds applicable to
contracts in general (for example, if they violate a rule of positive law, or if they are
unconscionable)." Id. at 1449. [FN9]
FN9. In a breach-of-warranty suit involving software, the Supreme Court of
Washington, en banc, enforced a license agreement that, like the agreement
at issue in ProCD, was presented on the user's computer screen each time
the software was used, and also was located on the outside of each diskette
pouch and on the inside cover of the instruction manuals. See M.A.
Mortenson Co., Inc. v. Timberline Software Corp., 140 Wash.2d 568, 998
P.2d 305 (Wash.2000).
The Seventh Circuit expanded this holding in Hill v. Gateway 2000, Inc., 105 F.3d
1147 (7th Cir.1997), cert. denied, 522 U.S. 808, 118 S.Ct. 47, 139 L.Ed.2d 13
(1997). In Hill, a customer ordered a computer by telephone; the computer
arrived in a box also containing license terms, including an arbitration clause, "to
govern unless the customer return[ed] the computer within 30 days." Id. at 1148.
The customer was not required to view or expressly assent to these terms before
using the computer. More than 30 days later, the customer brought suit based in
part on Gateway's warranty in the license agreement, and Gateway petitioned to
compel arbitration. The court held that the manufacturer, Gateway, "may invite
acceptance by conduct," and that "[b]y keeping the computer beyond 30 days, the
Hills accepted Gateway's offer, including the arbitration clause." Id. at 1149, 1150.
[FN10] Although not mentioned in the decision, the customer, by seeking to take
advantage of the warranty provisions contained in the license agreement, thus
could be fairly charged with the arbitration clause as well. It bears noting that
unlike the plaintiffs in Hill and Brower, who grounded their claims on express
warranties contained in the contracts, the Plaintiffs in this case base their claims on
alleged privacy rights independent of the License Agreement for SmartDownload.
FN10. See also Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 676 N.Y.S.2d
569 (N.Y.App.Div.1998) (in suit for breach of warranty, enforcing shrinkwrap license agreement identical to that in Hill ).
Not all courts to confront the issue have enforced shrink-wrap license
agreements. In Klocek v. Gateway, Inc., the court considered a standard shrinkwrap license agreement that was included in the box containing the computer
ordered by the plaintiff. 104 F.Supp.2d 1332 (D.Kan.2000). The court held that
Kansas and Missouri courts probably would not follow Hill or ProCD, supra. The
court held that the computer purchaser was the offeror, and that the vendor
accepted the purchaser's offer by shipping the computer in response to the offer.
Under Section 2-207 of the Uniform Commercial Code, [FN11] the court held, the
vendor's enclosure of the license agreement in the computer box constituted "[a]
definite and seasonable expression of acceptance ... operat[ing] as an acceptance
177
even though it state [d] terms additional to or different from those offered or
agreed upon, unless acceptance [was] expressly made conditional on assent to the
additional or different terms." Id. (quoting K.S.A. § 84-2-207). The court found
that the vendor had not made acceptance of the license agreement a condition of
the purchaser's acceptance of the computer, and that "the mere fact that Gateway
shipped the goods with the terms attached did not communicate to plaintiff any
unwillingness to proceed without plaintiff's agreement to the [license terms.]" Id.
at 1340. Therefore, the court held, the plaintiff did not agree to the license terms
and could not be compelled to arbitrate. Id. at 1341.
FN11. Although Section 2-207 of the Uniform Commercial Code, codified by
Kansas at K.S.A. § 84-2-207, generally is invoked in a "battle of the forms,"
the Klocek court held that "nothing in [the] language [of Section 2-207]
precludes application in a case which involves only one form." Id. at 1339.
For most of the products it makes available over the Internet (but not
SmartDownload), Netscape uses another common type of software license, one
usually identified as "click-wrap" licensing. A click-wrap license presents the user
with a message on his or her computer screen, requiring that the user manifest his
or her assent to the terms of the license agreement by clicking on an icon. [FN12]
The product cannot be obtained or used unless and until the icon is clicked. For
example, when a user attempts to obtain Netscape's Communicator or Navigator, a
web page appears containing the full text of the Communicator / Navigator license
agreement. Plainly visible on the screen is the query, "Do you accept all the terms
of the preceding license agreement? If so, click on the Yes button. If you select
No, Setup will close." Below this text are three button or icons: one labeled
"Back" and used to return to an earlier step of the download preparation; one
labeled "No," which if clicked, terminates the download; and one labeled "Yes,"
which if clicked, allows the download to proceed. Unless the user clicks "Yes,"
indicating his or her assent to the license agreement, the user cannot obtain the
software. The few courts that have had occasion to consider click-wrap contracts
have held them to be valid and enforceable. See, e.g., In re RealNetworks, Inc.
Privacy Litigation, No. 00C1366, 2000 WL 631341 (N.D.Ill. May 8, 2000); Hotmail
Corp. v. Van$ Money Pie, Inc., No. C 98-20064, 1998 WL 388389 (N.D.Cal. April
16, 1998).
FN12. In this respect, click-wrap licensing is similar to the shrink-wrap
license at issue in ProCD, supra, which appeared on the user's computer
screen when the software was used and could not be bypassed until the user
indicated acceptance of its terms. See ProCD, 86 F.3d at 1452.
A third type of software license, "browse-wrap," was considered by a
California federal court in Pollstar v. Gigmania Ltd., No. CIV-F-00-5671, 2000 WL
33266437 (E.D.Cal. Oct. 17, 2000). In Pollstar, the plaintiff's web page offered
allegedly proprietary information. Notice of a license agreement appears on the
178
plaintiff's web site. Clicking on the notice links the user to a separate web page
containing the full text of the license agreement, which allegedly binds any user of
the information on the site. However, the user is not required to click on an icon
expressing assent to the license, or even view its terms, before proceeding to use
the information on the site. The court referred to this arrangement as a "browsewrap" license. The defendant allegedly copied proprietary information from the
site. The plaintiff sued for breach of the license agreement, and the defendant
moved to dismiss for lack of mutual assent sufficient to form a contract. The
court, although denying the defendant's motion to dismiss, expressed concern
about the enforceability of the browse-wrap license:
Viewing the web site, the court agrees with the defendant that many visitors
to the site may not be aware of the license agreement. Notice of the license
agreement is provided by small gray text on a gray background.... No
reported cases have ruled on the enforceability of a browse wrap license....
While the court agrees with [the defendant] that the user is not immediately
confronted with the notice of the license agreement, this does not dispose of
[the plaintiff's] breach of contract claim. The court hesitates to declare the
invalidity and unenforceability of the browse wrap license agreement at this
time.
Id. at *5-6.
FN13. Judge Barbara Jones of this Court considered a similar license
arrangement in Register.com v. Verio, Inc., 126 F.Supp.2d 238
(S.D.N.Y.2000) (Jones, J.). The plaintiff posted license terms on its web
site, alongside a statement that "[b]y submitting this query [to the plaintiff's
database], you agree to abide by these terms." Id. at 248. The court held
that, "in light of this sentence at the end of Register.com' s terms of use,
there can be no question that by proceeding to submit a [ ] query, Verio
manifested its assent to be bound by Register.com's terms of use, and a
contract was formed and subsequently breached." Id. Judge Jones was
applying New York law. Id. at 241. Here, I am applying California law.
But, whether under California or New York law, the promissee's assent to be
bound is a required condition, and I find no such assent on the facts
presented in this case.
The SmartDownload License Agreement in the case before me differs
fundamentally from both click-wrap and shrink-wrap licensing, and resembles more
the browse-wrap license of Pollstar. Where click-wrap license agreements and the
shrink-wrap agreement at issue in ProCD require users to perform an affirmative
action unambiguously expressing assent before they may use the software, that
affirmative action is equivalent to an express declaration stating, "I assent to the
terms and conditions of the license agreement" or something similar. For example,
Netscape's Navigator will not function without a prior clicking of a box constituting
assent. Netscape's SmartDownload, in contrast, allows a user to download and
179
use the software without taking any action that plainly manifests assent to the
terms of the associated license or indicates an understanding that a contract is
being formed.
California courts carefully limit the circumstances under which a party may
be bound to a contract. "[A]n offeree, regardless of apparent manifestation of his
consent, is not bound by inconspicuous contractual provisions of which he was
unaware, contained in a document whose contractual nature is not obvious.... This
principle of knowing consent applies with particular force to provisions for
arbitration." Windsor Mills, Inc. v. Collins & Aikman Corp., 25 Cal.App.3d 987, 993,
101 Cal.Rptr. 347 (Cal.Ct.App.1972). Accord Lawrence v. Walzer & Gabrielson,
207 Cal.App.3d 1501, 1507, 256 Cal.Rptr. 6 (Cal.Ct.App.1989); Cory v. Golden
State Bank, 95 Cal.App.3d 360, 366, 157 Cal.Rptr. 538 (Cal.Ct.App.1979).
Netscape argues that the mere act of downloading indicates assent. However,
downloading is hardly an unambiguous indication of assent. The primary purpose
of downloading is to obtain a product, not to assent to an agreement. In contrast,
clicking on an icon stating "I assent" has no meaning or purpose other than to
indicate such assent. Netscape's failure to require users of SmartDownload to
indicate assent to its license as a precondition to downloading and using its
software is fatal to its argument that a contract has been formed.
Furthermore, unlike the user of Netscape Navigator or other click-wrap or shrinkwrap licensees, the individual obtaining SmartDownload is not made aware that he
is entering into a contract. SmartDownload is available from Netscape's web site
free of charge. Before downloading the software, the user need not view any
license agreement terms or even any reference to a license agreement, and need
not do anything to manifest assent to such a license agreement other than actually
taking possession of the product. From the user's vantage point, SmartDownload
could be analogized to a free neighborhood newspaper, readily obtained from a
sidewalk box or supermarket counter without any exchange with a seller or vender.
It is there for the taking.
The only hint that a contract is being formed is one small box of text referring to
the license agreement, text that appears below the screen used for downloading
and that a user need not even see before obtaining the product:
Please review and agree to the terms of the Netscape SmartDownload software
license agreement before downloading and using the software.
Couched in the mild request, "Please review," this language reads as a mere
invitation, not as a condition. The language does not indicate that a user must
agree to the license terms before downloading and using the software. While
clearer language appears in the License Agreement itself, the language of the
invitation does not require the reading of those terms [FN14] or provide adequate
notice either that a contract is being created or that the terms of the License
Agreement will bind the user.
180
FN14. Defendants argue that this case resembles the situation where a party
has failed to read a contract and is nevertheless bound by that contract.
See, e.g., Powers v. Dickson, Carlson & Campillo, 54 Cal.App.4th 1102,
1109, 63 Cal.Rptr.2d 261 (Cal.Ct.App.1997); Rowland v. PaineWebber Inc.,
4 Cal.App.4th 279, 287, 6 Cal.Rptr.2d 20 (Cal.Ct.App.1992). This argument
misses the point. The question before me is whether the parties have first
bound themselves to the contract. If they have unequivocally agreed to be
bound, the contract is enforceable whether or not they have read its terms.
The case law on software licensing has not eroded the importance of assent in
contract formation. Mutual assent is the bedrock of any agreement to which the
law will give force. Defendants' position, if accepted, would so expand the
definition of assent as to render it meaningless. Because the user Plaintiffs did not
assent to the license agreement, they are not subject to the arbitration clause
contained therein and cannot be compelled to arbitrate their claims against the
Defendants.
Defendants further contend that even if the arbitration clause in the
SmartDownload License Agreement is not binding, the license agreement applicable
to Netscape Communicator and Navigator applies to this dispute. As discussed
earlier, the Communicator and Navigator agreement is a conventional click-wrap
contract; it prevents any use of the software unless and until the user clicks an
icon stating his or her assent to the terms of the license. The agreement contains a
clause requiring arbitration of "all disputes relating to this Agreement." Assuming
arguendo that it is enforceable, the Communicator / Navigator license agreement is
a separate contract governing a separate transaction; it makes no mention of
SmartDownload. Plaintiffs' allegations involve an aspect of SmartDownload that
allegedly transmits private information about Plaintiffs' online activities to
Defendants. These claims do not implicate Communicator or Navigator any more
than they implicate the use of other software on Plaintiffs' computers. Resolution
of this dispute does not require interpretation of the parties' rights or obligations
under the license agreement for Netscape Communicator and Navigator.
Defendants were free to craft broader language for the Communicator / Navigator
license, explicitly making later applications such as SmartDownload subject to that
click-wrap agreement. They did not do so. Therefore, I reject Defendants'
argument that the arbitration clauses in the Communicator and Navigator license
agreements mandate arbitration of this dispute.
Hoffa v. United States
385 U.S. 293 (1966)
Mr. Justice STEWART delivered the opinion of the Court.
Over a period of several weeks in the late autumn of 1962 there took
place in a federal court in Nashville, Tennessee, a trial by jury in which
James Hoffa was charged with violating a provision of the Taft-Hartley Act.
That trial, known in the present record as the Test Fleet trial, ended with a
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hung jury. The petitioners now before us—James Hoffa, Thomas Parks, Larry
Campbell, and Ewing King—were tried and convicted in 1964 for
endeavoring to bribe members of that jury. The convictions were affirmed by
the Court of Appeals. A substantial element in the Government's proof that
led to the convictions of these four petitioners was contributed by a witness
named Edward Partin, who testified to several incriminating statements
which he said petitioners Hoffa and King had made in his presence during
the course of the Test Fleet trial. Our grant of certiorari was limited to the
single issue of whether the Government's use in this case of evidence
supplied by Partin operated to invalidate these convictions. 382 U.S. 1024,
86 S.Ct. 645, 15 L.Ed.2d 538.
The specific question before us, as framed by counsel for the petitioners,
is this:
‘Whether evidence obtained by the Government by means of deceptively
placing a secret informer in the quarters and councils of a defendant during
one criminal trial so violates the defendant's Fourth, Fifth and Sixth
Amendment rights that suppression of such evidence is required in a
subsequent trial of the same defendant on a different charge.’
***
The controlling facts can be briefly stated. The Test Fleet trial, in which
James Hoffa was the sole individual defendant, was in progress between
October 22 and December 23, 1962, in Nashville, Tennessee. James Hoffa
was president of the International Brotherhood of Teamsters. During the
course of the trial he occupied a three-room suite in the Andrew Jackson
Hotel in Nashville. One of his constant companions throughout the trial was
the petitioner King, president of the Nashville local of the Teamsters Union.
Edward Partin, a resident of Baton Rouge, Louisiana, and a local Teamsters
Union official there, made repeated visits to Nashville during the period of
the trial. On these visits he frequented the Hoffa hotel suite, and was
continually in the company of Hoffa and his associates, including King, in and
around the hotel suite, the hotel lobby, the courthouse, and elsewhere in
Nashville. During this period Partin made frequent reports to a federal agent
named Sheridan concerning conversations he said Hoffa and King had had
with him and with each other, disclosing endeavors to bribe members of the
Test Fleet jury. Partin's reports and his subsequent testimony at the
petitioners' trial unquestionably contributed, directly or indirectly, to the
convictions of all four of the petitioners.
The chain of circumstances which led Partin to be in Nashville during the
Test Fleet trial extended back at least to September of 1962. At that time
Partin was in jail in Baton Rouge on a state criminal charge. He was also
under a federal indictment for embezzling union funds, and other
182
indictments for state offenses were pending against him. Between that time
and Partin's initial visit to Nashville on October 22 he was released on bail on
the state criminal charge, and proceedings under the federal indictment
were postponed. On October 8, Partin telephoned Hoffa in Washington, D.C.,
to discuss local union matters and Partin's difficulties with the authorities. In
the course of this conversation Partin asked if he could see Hoffa to confer
about these problems, and Hoffa acquiesced. Partin again called Hoffa on
October 18 and arranged to meet him in Nashville. During this period Partin
also consulted on several occasions with federal law enforcement agents,
who told him that Hoffa might attempt to tamper with the Test Fleet jury,
and asked him to be on the lookout in Nashville for such attempts and to
report to the federal authorities any evidence of wrongdoing that he
discovered. Partin agreed to do so.
After the Test Fleet trial was completed, Partin's wife received four
monthly installment payments of $300 from government funds, and the
state and federal charges against Partin were either dropped or not actively
pursued.
Reviewing these circumstances in detail, the Government insists the fair
inference is that Partin went to Nashville on his own initiative to discuss
union business and his own problems with Hoffa, that Partin ultimately
cooperated closely with federal authorities only after he discovered evidence
of jury tampering in the Test Fleet trial, that the payments to Partin's wife
were simply in partial reimbursement of Partin's subsequent out-of-pocket
expenses, and that the failure to prosecute Partin on the state and federal
charges had no necessary connection with his services as an informer. The
findings of the trial court support this version of the facts, and these findings
were accepted by the Court of Appeals as ‘supported by substantial
evidence.’ 349 F.2d at 36. But whether or not the Government ‘placed’
Partin with Hoffa in Nashville during the Test Fleet trial, we proceed upon the
premise that Partin was a government informer from the time he first
arrived in Nashville on October 22, and that the Government compensated
him for his services as such. It is upon that premise that we consider the
constitutional issues presented.
Before turning to those issues we mention an additional preliminary
contention of the Government. The petitioner Hoffa was the only individual
defendant in the Test Fleet case, and Partin had conversations during the
Test Fleet trial only with him and with the petitioner King. So far as appears,
Partin never saw either of the other two petitioners during that period.
Consequently, the Government argues that, of the four petitioners, only
Hoffa has standing to raise a claim that his Sixth Amendment right to
counsel in the Test Fleet trial was impaired, and only he and King have
standing with respect to the other constitutional claims. Cf. Wong Sun v.
United States, 371 U.S. 471, 487—488, 491—492, 83 S.Ct. 407, 417—418,
419—420, 9 L.Ed.2d 441; Jones v. United States, 362 U.S. 257, 259—267,
183
80 S.Ct. 725, 730—734, 4 L.Ed.2d 697. It is clear, on the other hand, that
Partin's reports to the agent Sheridan uncovered leads that made possible
the development of evidence against petitioners Parks and Campbell. But we
need not pursue the nuances of these ‘standing’ questions, because it is
evident in any event that none of the petitioners can prevail unless the
petitioner Hoffa prevails. For that reason, the ensuing discussion is confined
to the claims of the petitioner Hoffa (hereinafter petitioner), all of which he
clearly has standing to invoke.
I.
It is contended that only by violating the petitioner's rights under the
Fourth Amendment was Partin able to hear the petitioner's incriminating
statements in the hotel suite, and that Partin's testimony was therefore
inadmissible under the exclusionary rule of Weeks v. United States, 232 U.S.
383, 34 S.Ct. 341, 58 L.Ed. 652. The argument is that Partin's failure to
disclose his role as a government informer vitiated the consent that the
petitioner gave to Partin's repeated entries into the suite, and that by
listening to the petitioner's statements Partin conducted an illegal ‘search’
for verbal evidence.
The preliminary steps of this argument are on solid ground. A hotel room
can clearly be the object of Fourth Amendment protection as much as a
home or an office. United States v. Jeffers, 342 U.S. 48, 72 S.Ct. 93, 96
L.Ed. 59. The Fourth Amendment can certainly be violated by guileful as well
as by forcible intrusions into a constitutionally protected area. Gouled v.
United States, 255 U.S. 298, 41 S.Ct. 261, 65 L.Ed. 647. And the protections
of the Fourth Amendment are surely not limited to tangibles, but can extend
as well to oral statements. Silverman v. United States, 365 U.S. 505, 81
S.Ct. 679, 5 L.Ed.2d 734.
Where the argument falls is in its misapprehension of the fundamental
nature and scope of Fourth Amendment protection. What the Fourth
Amendment protects is the security a man relies upon when he places
himself or his property within a constitutionally protected area, be it his
home or his office, his hotel room or his automobile. There he is protected
from unwarranted governmental intrusion. And when he puts something in
his filing cabinet, in his desk drawer, or in his pocket, he has the right to
know it will be secure from an unreasonable search or an unreasonable
seizure. So it was that the Fourth Amendment could not tolerate the
warrantless search of the hotel room in Jeffers, the purloining of the
petitioner's private papers in Gouled, or the surreptitious electronic
surveillance in Silverman. Countless other cases which have come to this
Court over the years have involved a myriad of differing factual contexts in
which the protections of the Fourth Amendment have been appropriately
invoked. No doubt the future will bring countless others. By nothing we say
here do we either foresee or foreclose factual situations to which the Fourth
184
Amendment may be applicable.
In the present case, however, it is evident that no interest legitimately
protected by the Fourth Amendment is involved. It is obvious that the
petitioner was not relying on the security of his hotel suite when he made
the incriminating statements to Partin or in Partin's presence. Partin did not
enter the suite by force or by stealth. He was not a surreptitious
eavesdropper. Partin was in the suite by invitation, and every conversation
which he heard was either directed to him or knowingly carried on in his
presence. The petitioner, in a word, was not relying on the security of the
hotel room; he was relying upon his misplaced confidence that Partin would
not reveal his wrongdoing. As counsel for the petitioner himself points out,
some of the communications with Partin did not take place in the suite at all,
but in the ‘hall of the hotel,’ in the ‘Andrew Jackson Hotel lobby,’ and ‘at the
courthouse.’
Neither this Court nor any member of it has ever expressed the view that
the Fourth Amendment protects a wrongdoer's misplaced belief that a
person to whom he voluntarily confides his wrongdoing will not reveal it.
Indeed, the Court unanimously rejected that very contention less than four
years ago in Lopez v. United States, 373 US. 427, 83 S.Ct. 1381, 10 L.Ed.2d
462. In that case the petitioner had been convicted of attempted bribery of
an internal revenue agent named Davis. The Court was divided with regard
to the admissibility in evidence of a surreptitious electronic recording of an
incriminating conversation Lopez had had in his private office with Davis. But
there was no dissent from the view that testimony about the conversation by
Davis himself was clearly admissible.
As the Court put it, ‘Davis was not guilty of an unlawful invasion of
petitioner's office simply because his apparent willingness to accept a bribe
was not real. Compare Wong Sun v. United States, 371 U.S. 471, 83 S.Ct.
407, 9 L.Ed.2d 441. He was in the office with petitioner's consent, and while
there he did not violate the privacy of the office by seizing something
surreptitiously without petitioner's knowledge. Compare Gouled v. United
States, supra. The only evidence obtained consisted of statements made by
Lopez to Davis, statements which Lopez knew full well could be used against
him by Davis if he wished. * * *’ 373 U.S. at 438, 83 S.Ct. at 1387, 10
L.Ed.2d 462. In the words of the dissenting opinion in Lopez, ‘The risk of
being overheard by an eavesdropper or betrayed by an informer or deceived
as to the identity of one with whom one deals is probably inherent in the
conditions of human society. It is the kind of risk we necessarily assume
whenever we speak.’ Id., 373 U.S. at 465, 83 S.Ct. at 1402, 10 L.Ed.2d 462.
See also Lewis v. United States, 385 U.S. 206, 87 S.Ct. 424, 17 L.Ed.2d
312.
Adhering to these views, we hold that no right protected by the Fourth
Amendment was violated in the present case.
185
****
Affirmed.
Charles Katz v. United States
389 U.S. 347 (1967)
MR. JUSTICE STEWART delivered the opinion of the Court.
The petitioner was convicted in the District Court for the Southern District
of California under an eight-count indictment charging him with transmitting
wagering information by telephone from Los Angeles to Miami and Boston in
violation of a federal statute.10 At trial the Government was permitted, over
the petitioner's objection, to introduce evidence of the petitioner's end of
telephone conversations, overheard by FBI agents who had attached an
electronic listening and recording device to the outside of the public
telephone booth from which he had placed his calls. In affirming his
conviction, the Court of Appeals rejected the contention that the recordings
had been obtained in violation of the Fourth Amendment, because ‘(t)here
was no physical entrance into the area occupied by, (the petitioner).’ We
granted certiorari in order to consider the constitutional questions thus
presented.
We find no merit in the petitioner's further suggestion that his indictment
must be dismissed. After his conviction was affirmed by the Court of
10
18 U.S.C. s 1084. That statute provides in pertinent part:
‘(a) Whoever being engaged in the business of betting or wagering
knowingly uses a wire communication facility for the transmission in
interstate or foreign commerce of bets or wagers or information
assisting in the placing of bets or wagers on any sporting event or
contest, or for the transmission of a wire communication which entitles
the recipient to receive money or credit as a result of bets or wagers,
or for information assisting in the placing of bets or wagers, shall be
fined no more than $10,000 or inprisoned not more than two years, or
both.
‘(b) Nothing in this section shall be construed to prevent the
transmission in interstate or foreign commerce of information for use
in news reporting of sporting events or contests, or for the
transmission of information assisting in the placing of bets or wagers
on a sporting event or contest from a State where betting on that
sporting event or contest is legal into a State in which such betting is
legal.’
186
Appeals, he testified before a federal grand jury concerning the charges
involved here. Because he was compelled to testify pursuant to a grant of
immunity, 48 Stat. 1096, as amended, 47 U.S.C. s 409(l), it is clear that the
fruit of his testimony cannot be used against him in any future trial. But the
petitioner asks for more. He contends that his conviction must be vacated
and the charges against him dismissed lest he be ‘subjected to (a) penalty *
* * on account of (a) * * * matter * * * concerning which he (was)
compelled * * * to testify * * *.’ 47 U.S.C. s 409(l). Frank v. United States,
120 U.S.App.D.C. 392, 347 F.2d 486. We disagree. In relevant part, s 409(l)
substantially repeats the language of the Compulsory Testimony Act of
1893, 27 Stat. 443, 49 U.S.C. s 46, which was Congress' response to this
Court's statement that an immunity statute can supplant the Fifth
Amendment privilege against self-incrimination only if it affords adequate
protection from future prosecution or conviction. Counselman v. Hitchcock,
142 U.S. 547, 585-586, 12 S.Ct. 195, 206-207, 35 L.Ed. 1110. The statutory
provision here involved was designed to provide such protection, see Brown
v. United States, 359 U.S. 41, 45-46, 79 S.Ct. 539, 543-544, 3 L.Ed.2d 609,
not to confer immunity from punishment pursuant to a prior prosecution and
adjudication of guilt. Cf. Reina v. United States, 364 U.S. 507, 513-514, 81
S.Ct. 260, 264-265, 5 L.Ed.2d 249.
The petitioner had phrased those questions as follows:
‘A. Whether a public telephone booth is a constitutionally protected area
so that evidence obtained by attaching an electronic listening recording
device to the top of such a booth is obtained in violation of the right to
privacy of the user of the booth.
‘B. Whether physical penetration of a constitutionally protected area is
necessary before a search and seizure can be said to be violative of the
Fourth Amendment to the United States Constitution.’
We decline to adopt this formulation of the issues. In the first place the
correct solution of Fourth Amendment problems is not necessarily promoted
by incantation of the phrase ‘constitutionally protected area.’ Secondly, the
Fourth Amendment cannot be translated into a general constitutional ‘right
to privacy.’ That Amendment protects individual privacy against certain
kinds of governmental intrusion, but its protections go further, and often
have nothing to do with privacy at all. Other provisions of the Constitution
protect personal privacy from other forms of governmental invasion. But the
protection of a person's general right to privacy—his right to be let alone by
other people6—is, like the protection of his property and of his very life, left
6
See Warren & Brandeis, The Right to Privacy, 4 Harv.L.Rev. 193 (1890).
187
largely to the law of the individual States.
Because of the misleading way the issues have been formulated, the
parties have attached great significance to the characterization of the
telephone booth from which the petitioner placed his calls. The petitioner has
strenuously argued that the booth was a ‘constitutionally protected area.’
The Government has maintained with equal vigor that it was not. But this
effort to decide whether or not a given ‘area,’ viewed in the abstract, is
‘constitutionally protected’ deflects attention from the problem presented by
this case. For the Fourth Amendment protects people, not places. What a
person knowingly exposes to the public, even in his own home or office, is
not a subject of Fourth Amendment protection. But what he seeks to
preserve as private, even in an area accessible to the public, may be
constitutionally protected.
The Government stresses the fact that the telephone booth from which
the petitioner made his calls was constructed partly of glass, so that he was
as visible after he entered it as he would have been if he had remained
outside. But what he sought to exclude when he entered the booth was not
the intruding eye-it was the uninvited ear. He did not shed his right to do so
simply because he made his calls from a place where he might be seen. No
less than an individual in a business office, in a friend's apartment, or in a
taxicab, a person in a telephone booth may rely upon the protection of the
Fourth Amendment. One who occupies it, shuts the door behind him, and
pays the toll that permits him to place a call is surely entitled to assume that
the words he utters into the mouthpiece will not be broadcast to the world.
To read the Constitution more narrowly is to ignore the vital role that the
public telephone has come to play in private communication.
The Government contends, however, that the activities of its agents in
this case should not be tested by Fourth Amendment requirements, for the
surveillance technique they employed involved no physical penetration of the
telephone booth from which the petitioner placed his calls. It is true that the
absence of such penetration was at one time thought to foreclose further
Fourth Amendment inquiry, Olmstead v. United States, 277 U.S. 438, 457,
464, 466, 48 S.Ct. 564, 565, 567, 568, 72 L.Ed. 944; Goldman v. United
States, 316 U.S. 129, 134-136, 62 S.Ct. 993, 995-997, 86 L.Ed. 1322, for
that Amendment was thought to limit only searches and seizures of tangible
property. But ‘(t)he premise that property interests control the right of the
Government to search and seize has been discredited.’ Warden, Md.
Penitentiary v. Hayden, 387 U.S. 294, 304, 87 S.Ct. 1642, 1648, 18 L.Ed.2d
782. Thus, although a closely divided Court supposed in Olmstead that
surveillance without any trespass and without the seizure of any material
object fell outside the ambit of the Constitution, we have since departed
from the narrow view on which that decision rested. Indeed, we have
expressly held that the Fourth Amendment governs not only the seizure of
tangible items, but extends as well to the recording of oral statements
188
overheard without any ‘technical trespass under * * * local property law.’
Silverman v. United States, 365 U.S. 505, 511, 81 S.Ct. 679, 682, 5 L.Ed.2d
734. Once this much is acknowledged, and once it is recognized that the
Fourth Amendment protects people—and not simply ‘areas'—against
unreasonable searches and seizures it becomes clear that the reach of that
Amendment cannot turn upon the presence or absence of a physical
intrusion into any given enclosure.
We conclude that the underpinnings of Olmstead and Goldman have been
so eroded by our subsequent decisions that the ‘trespass' doctrine there
enunciated can no longer be regarded as controlling. The Government's
activities in electronically listening to and recording the petitioner's words
violated the privacy upon which he justifiably relied while using the
telephone booth and thus constituted a ‘search and seizure’ within the
meaning of the Fourth Amendment. The fact that the electronic device
employed to achieve that end did not happen to penetrate the wall of the
booth can have no constitutional significance.
The question remaining for decision, then, is whether the search and
seizure conducted in this case complied with constitutional standards. In that
regard, the Government's position is that its agents acted in an entirely
defensible manner: They did not begin their electronic surveillance until
investigation of the petitioner's activities had established a strong probability
that he was using the telephone in question to transmit gambling
information to persons in other States, in violation of federal law. Moreover,
the surveillance was limited, both in scope and in duration, to the specific
purpose of establishing the contents of the petitioner's unlawful telephonic
communications. The agents confined their surveillance to the brief periods
during which he used the telephone booth,14 and they took great care to
overhear only the conversations of the petitioner himself.
Accepting this account of the Government's actions as accurate, it is clear
that this surveillance was so narrowly circumscribed that a duly authorized
magistrate, properly notified of the need for such investigation, specifically
informed of the basis on which it was to proceed, and clearly apprised of the
precise intrusion it would entail, could constitutionally have authorized, with
appropriate safeguards, the very limited search and seizure that the
Government asserts in fact took place. Only last Term we sustained the
validity of such an authorization, holding that, under sufficiently ‘precise and
Based upon their previous visual observations of the petitioner, the agents
correctly predicted that he would use the telephone booth for several
minutes at approximately the same time each morning. The petitioner was
subjected to electronic surveillance only during this predetermined period.
Six recordings, averaging some three minutes each, were obtained and
admitted in evidence. They preserved the petitioner's end of conversations
converning the placing of bets and the receipt of wagering information.
14
189
discriminate circumstances,’ a federal court may empower government
agents to employ a concealed electronic device ‘for the narrow and
particularized purpose of ascertaining the truth of the * * * allegations' of a
‘detailed factual affidavit alleging the commission of a specific criminal
offense.’ Osborn v. United States, 385 U.S. 323, 329-330, 87 S.Ct. 429,
433, 17 L.Ed.2d 394. Discussing that holding, the Court in Berger v. State of
New York, 388 U.S. 41, 87 S.Ct. 1873, 18 L.Ed.2d 1040, said that ‘the order
authorizing the use of the electronic device’ in Osborn ‘afforded similar
protections to those * * * of conventional warrants authorizing the seizure of
tangible evidence.’ Through those protections, ‘no greater invasion of
privacy was permitted than was necessary under the circumstances.’ Id., at
57, 87 S.Ct. at 1882. Here, too, a similar judicial order could have
accommodated ‘the legitimate needs of law enforcement by authorizing the
carefully limited use of electronic surveillance.
The Government urges that, because its agents relied upon the decisions
in Olmstead and Goldman, and because they did no more here than they
might properly have done with prior judicial sanction, we should
retroactively validate their conduct. That we cannot do. It is apparent that
the agents in this case acted with restraint. Yet the inescapable fact is that
this restraint was imposed by the agents themselves, not by a judicial
officer. They were not required, before commencing the search, to present
their estimate of probable cause for detached scrutiny by a neutral
magistrate. They were not compelled, during the conduct of the search
itself, to observe precise limits established in advance by a specific court
order. Nor were they directed, after the search had been completed, to
notify the authorizing magistrate in detail of all that had been seized. In the
absence of such safeguards, this Court has never sustained a search upon
the sole ground that officers reasonably expected to find evidence of a
particular crime and voluntarily confined their activities to the least intrusive
means consistent with that end. Searches conducted without warrants have
been held unlawful ‘notwithstanding facts unquestionably showing probable
cause,’ Agnello v. United States, 269 U.S. 20, 33, 46 S.Ct. 4, 6, 70 L.Ed.
145, for the Constitution requires ‘that the deliberate, impartial judgment of
a judicial officer * * * be interposed between the citizen and the police * *
*.’ Wong Sun v. United States, 371 U.S. 471, 481-482, 83 S.Ct. 407, 414, 9
L.Ed.2d 441. ‘Over and again this Court has emphasized that the mandate of
the (Fourth) Amendment requires adherence to judicial processes,’ United
States v. Jeffers, 342 U.S. 48, 51, 72 S.Ct. 93, 95, 96 L.Ed. 59, and that
searches conducted outside the judicial process, without prior approval by
judge or magistrate, are per se unreasonable under the Fourth
Amendment—subject only to a few specifically established and welldelineated exceptions.
It is difficult to imagine how any of those exceptions could ever apply to
the sort of search and seizure involved in this case. Even electronic
190
surveillance substantially contemporaneous with an individual's arrest could
hardly be deemed an ‘incident’ of that arrest. Nor could the use of electronic
surveillance without prior authorization be justified on grounds of ‘hot
pursuit. And, of course, the very nature of electronic surveillance precludes
its use pursuant to the suspect's consent.
The Government does not question these basic principles. Rather, it urges
the creation of a new exception to cover this case. It argues that
surveillance of a telephone booth should be exempted from the usual
requirement of advance authorization by a magistrate upon a showing of
probable cause. We cannot agree. Omission of such authorization ‘bypasses
the safeguards provided by an objective predetermination of probable cause,
and substitutes instead the far less reliable procedure of an after-the-event
justification for the * * * search, too likely to be subtly influenced by the
familiar shortcomings of hindsight judgment.’ Beck v. State of Ohio, 379
U.S. 89, 96, 85S.Ct. 223, 228, 13 L.Ed.2d 142.
And bypassing a neutral predetermination of the scope of a search leaves
individuals secure from Fourth Amendment violations ‘only in the discretion
of the police.’ Id., at 97, 85 S.Ct. at 229.
These considerations do not vanish when the search in question is
transferred from the setting of a home, an office, or a hotel room to that of a
telephone booth. Wherever a man may be, he is entitled to know that he will
remain free from unreasonable searches and seizures. The government
agents here ignored ‘the procedure of antecedent justification * * * that is
central to the Fourth Amendment,' a procedure that we hold to be a
constitutional precondition of the kind of electronic surveillance involved in
this case. Because the surveillance here failed to meet that condition, and
because it led to the petitioner's conviction, the judgment must be reversed.
It is so ordered.
Judgment reversed.
*****
Mr. Justice HARLAN, concurring.
I join the opinion of the Court, which I read to hold only (a) that an
enclosed telephone booth is an area where, like a home, a person has a
constitutionally protected reasonable expectation of privacy; (b) that
electronic as well as physical intrusion into a place that is in this sense
private may constitute a violation of the Fourth Amendment;and (c) that the
invasion of a constitutionally protected area by federal authorities is, as the
Court has long held, presumptively unreasonable in the absence of a search
warrant.
As the Court's opinion states, ‘the Fourth Amendment protects people,
not places.’ The question, however, is what protection it affords to those
people. Generally, as here, the answer to that question requires reference to
191
a ‘place.’ My understanding of the rule that has emerged from prior decisions
is that there is a twofold requirement, first that a person have exhibited an
actual (subjective) expectation of privacy and, second, that the expectation
be one that society is prepared to recognize as ‘reasonable.’ Thus a man's
home is, for most purposes, a place where he expects privacy, but objects,
activities, or statements that he exposes to the ‘plain view’ of outsiders are
not ‘protected’ because no intention to keep them to himself has been
exhibited. On the other hand, conversations in the open would not be
protected against being overheard, for the expectation of privacy under the
circumstances would be unreasonable.
The critical fact in this case is that ‘(o)ne who occupies it, (a telephone
booth) shuts the door behind him, and pays the toll that permits him to
place a call is surely entitled to assume’ that his conversation is not being
intercepted. Ante, at 511. The point is not that the booth is ‘accessible to the
public’ at other times, ante, at 511, but that it is a temporarily private place
whose momentary occupants' expectations of freedom from intrusion are
recognized as reasonable.
In Silverman v. United States, 365 U.S. 505, 81 S.Ct. 679, 5 L.Ed.2d
734, we held that eavesdropping accomplished by means of an electronic
device that penetrated the premises occupied by petitioner was a violation of
the Fourth Amendment. That case established that interception of
conversations reasonably intended to be private could constitute a ‘search
and seizure,’ and that the examination or taking of physical property was not
required. This view of the Fourth Amendment was followed in Wong Sun
v.United States, 371 U.S. 471, at 485, 83 S.Ct. 407, at 416, 9 L.Ed.2d 441,
and Berger v. State of New York, 388 U.S. 41, at 51, 87 S.Ct. 1873, at
1879, 18 L.Ed.2d 1040. Also compare Osborne v. United States, 385 U.S.
323, at 327, 87 S.Ct. 429, at 431, 17 L.Ed.2d 394. In Silverman we found it
unnecessary to re-examine Goldman v. United States, 316 U.S. 129, 62
S.Ct. 993, 86 L.Ed. 1322, which had held that electronic surveillance
accomplished without the physical penetration of petitioner's premises by a
tangible object did not violate the Fourth Amendment. This case requires us
to reconsider Goldman, and I agree that it should now be overruled. Its
limitation on Fourth Amendment protection is, in the present day, bad
physics as well as bad law, for reasonable expectations of privacy may be
defeated by electronic as well as physical invasion.
Finally, I do not read the Court's opinion to declare that no interception of
a conversation one-half of which occurs in a public telephone booth can be
reasonable in the absence of a warrant. As elsewhere under the Fourth
Amendment, warrants are the general rule, to which the legitimate needs of
law enforcement may demand specific exceptios. It will be time enough to
consider any such exceptions when an appropriate occasion presents itself,
and I agree with the Court that this is not one.
192
Danny Lee Kyllo v. United States
533 U.S. 27 (2001)
Justice SCALIA delivered the opinion of the Court.
This case presents the question whether the use of a thermal-imaging
device aimed at a private home from a public street to detect relative
amounts of heat within the home constitutes a “search” within the meaning
of the Fourth Amendment.
I
In 1991 Agent William Elliott of the United States Department of the
Interior came to suspect that marijuana was being grown in the home
belonging to petitioner Danny Kyllo, part of a triplex on Rhododendron Drive
in Florence, Oregon. Indoor marijuana growth typically requires highintensity lamps. In order to determine whether an amount of heat was
emanating from petitioner's home consistent with the use of such lamps, at
3:20 a.m. on January 16, 1992, Agent Elliott and Dan Haas used an Agema
Thermovision 210 thermal imager to scan the triplex. Thermal imagers
detect infrared radiation, which virtually all objects emit but which is not
visible to the naked eye. The imager converts radiation into images based on
relative warmth—black is cool, white is hot, shades of gray connote relative
differences; in that respect, it operates somewhat like a video camera
showing heat images. The scan of Kyllo's home took only a few minutes and
was performed from the passenger seat of Agent Elliott's vehicle across the
street from the front of the house and also from the street in back of the
house. The scan showed that the roof over the garage and a side wall of
petitioner's home were relatively hot compared to the rest of the home and
substantially warmer than neighboring homes in the triplex. Agent Elliott
concluded that petitioner was using halide lights to grow marijuana in his
house, which indeed he was. Based on tips from informants, utility bills, and
the thermal imaging, a Federal Magistrate Judge issued a warrant
authorizing a search of petitioner's home, and the agents found an indoor
growing operation involving more than 100 plants. Petitioner was indicted on
one count of manufacturing marijuana, in violation of 21 U.S.C. § 841(a)(1).
He unsuccessfully moved to suppress the evidence seized from his home and
then entered a conditional guilty plea.
The Court of Appeals for the Ninth Circuit remanded the case for an
evidentiary hearing regarding the intrusiveness of thermal imaging. On
remand the District Court found that the Agema 210 “is a non-intrusive
device which emits no rays or beams and shows a crude visual image of the
heat being radiated from the outside of the house”; it “did not show any
people or activity within the walls of the structure”; “[t]he device used
cannot penetrate walls or windows to reveal conversations or human
193
activities”; and “[n]o intimate details of the home were observed.”
Supp.App. to Pet. for Cert. 39–40. Based on these findings, the District
Court upheld the validity of the warrant that relied in part upon the thermal
imaging, and reaffirmed its denial of the motion to suppress. A divided Court
of Appeals initially reversed, 140 F.3d 1249 (1998), but that opinion was
withdrawn and the panel (after a change in composition) affirmed, 190 F.3d
1041 (1999), with Judge Noonan dissenting. The court held that petitioner
had shown no subjective expectation of privacy because he had made no
attempt to conceal the heat escaping from his home, id., at 1046, and even
if he had, there was no objectively reasonable expectation of privacy
because the imager “did not expose any intimate details of Kyllo's life,” only
“amorphous ‘hot spots' on the roof and exterior wall,” id., at 1047. We
granted certiorari. 530 U.S. 1305, 121 S.Ct. 29, 147 L.Ed.2d 1052 (2000).
II
The Fourth Amendment provides that “[t]he right of the people to be
secure in their persons, houses, papers, and effects, against unreasonable
searches and seizures, shall not be violated.” “At the very core” of the
Fourth Amendment “stands the right of a man to retreat into his own home
and there be free from unreasonable governmental intrusion.” Silverman v.
United States, 365 U.S. 505, 511, 81 S.Ct. 679, 5 L.Ed.2d 734 (1961). With
few exceptions, the question whether a warrantless search of a home is
reasonable and hence constitutional must be answered no.
On the other hand, the antecedent question whether or not a Fourth
Amendment “search” has occurred is not so simple under our precedent.11
The permissibility of ordinary visual surveillance of a home used to be clear
because, well into the 20th century, our Fourth Amendment jurisprudence
was tied to common-law trespass. See, e.g., Goldman v. United States, 316
U.S. 129, 134–136, 62 S.Ct. 993, 86 L.Ed. 1322 (1942); Olmstead v. United
States, 277 U.S. 438, 464–466, 48 S.Ct. 564, 72 L.Ed. 944 (1928). Cf.
Silverman v. United States, supra, at 510–512, 81 S.Ct. 679 (technical
trespass not necessary for Fourth Amendment violation; it suffices if there is
“actual intrusion into a constitutionally protected area”). Visual surveillance
was unquestionably lawful because “ ‘the eye cannot by the laws of England
be guilty of a trespass.’ ” Boyd v. United States, 116 U.S. 616, 628, 6 S.Ct.
524, 29 L.Ed. 746 (1886) (quoting Entick v. Carrington, 19 How. St. Tr.
1029, 95 Eng. Rep. 807 (K.B.1765)). We have since decoupled violation of a
person's Fourth Amendment rights from trespassory violation of his
When the Fourth Amendment was adopted, as now, to “search” meant
“[t]o look over or through for the purpose of finding something; to explore;
to examine by inspection; as, to search the house for a book; to search the
wood for a thief.” N. Webster, An American Dictionary of the English
Language 66 (1828) (reprint 6th ed.1989).
11
194
property, see Rakas v. Illinois, 439 U.S. 128, 143, 99 S.Ct. 421, 58 L.Ed.2d
387 (1978), but the lawfulness of warrantless visual surveillance of a home
has still been preserved. As we observed in California v. Ciraolo, 476 U.S.
207, 213, 106 S.Ct. 1809, 90 L.Ed.2d 210 (1986), “[t]he Fourth Amendment
protection of the home has never been extended to require law enforcement
officers to shield their eyes when passing by a home on public
thoroughfares.”
One might think that the new validating rationale would be that
examining the portion of a house that is in plain public view, while it is a
“search” despite the absence of trespass, is not an “unreasonable” one
under the Fourth Amendment. See Minnesota v. Carter, 525 U.S. 83, 104,
119 S.Ct. 469, 142 L.Ed.2d 373 (1998) (BREYER, J., concurring in
judgment). But in fact we have held that visual observation is no “search” at
all—perhaps in order to preserve somewhat more intact our doctrine that
warrantless searches are presumptively unconstitutional. See Dow Chemical
Co. v. United States, 476 U.S. 227, 234–235, 239, 106 S.Ct. 1819, 90
L.Ed.2d 226 (1986). In assessing when a search is not a search, we have
applied somewhat in reverse the principle first enunciated in Katz v. United
States, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967). Katz involved
eavesdropping by means of an electronic listening device placed on the
outside of a telephone booth—a location not within the catalog (“persons,
houses, papers, and effects”) that the Fourth Amendment protects against
unreasonable searches. We held that the Fourth Amendment nonetheless
protected Katz from the warrantless eavesdropping because he “justifiably
relied” upon the privacy of the telephone booth. Id., at 353, 88 S.Ct. 507. As
Justice Harlan's oft-quoted concurrence described it, a Fourth Amendment
search occurs when the government violates a subjective expectation of
privacy that society recognizes as reasonable. See id., at 361, 88 S.Ct. 507.
We have subsequently applied this principle to hold that a Fourth
Amendment search does not occur—even when the explicitly protected
location of a house is concerned—unless “the individual manifested a
subjective expectation of privacy in the object of the challenged search,” and
“society [is] willing to recognize that expectation as reasonable.” Ciraolo,
supra, at 211, 106 S.Ct. 1809. We have applied this test in holding that it is
not a search for the police to use a pen register at the phone company to
determine what numbers were dialed in a private home, Smith v. Maryland,
442 U.S. 735, 743–744, 99 S.Ct. 2577, 61 L.Ed.2d 220 (1979), and we have
applied the test on two different occasions in holding that aerial surveillance
of private homes and surrounding areas does not constitute a search,
Ciraolo, supra; Florida v. Riley, 488 U.S. 445, 109 S.Ct. 693, 102 L.Ed.2d
835 (1989).
The present case involves officers on a public street engaged in more
than naked-eye surveillance of a home. We have previously reserved
judgment as to how much technological enhancement of ordinary perception
195
from such a vantage point, if any, is too much. While we upheld enhanced
aerial photography of an industrial complex in Dow Chemical, we noted that
we found “it important that this is not an area immediately adjacent to a
private home, where privacy expectations are most heightened,” 476 U.S.,
at 237, n. 4, 106 S.Ct. 1819 (emphasis in original).
III
It would be foolish to contend that the degree of privacy secured to
citizens by the Fourth Amendment has been entirely unaffected by the
advance of technology. For example, as the cases discussed above make
clear, the technology enabling human flight has exposed to public view (and
hence, we have said, to official observation) uncovered portions of the house
and its curtilage that once were private. See Ciraolo, supra, at 215, 106
S.Ct. 1809. The question we confront today is what limits there are upon
this power of technology to shrink the realm of guaranteed privacy.
The Katz test—whether the individual has an expectation of privacy
that society is prepared to recognize as reasonable—has often been criticized
as circular, and hence subjective and unpredictable. See 1 W. LaFave,
Search and Seizure § 2.1(d), pp. 393–394 (3d ed.1996); Posner, The
Uncertain Protection of Privacy by the Supreme Court, 1979 S.Ct. Rev. 173,
188; Carter, supra, at 97, 119 S.Ct. 469 (SCALIA, J., concurring). But see
Rakas, supra, at 143–144, n. 12, 99 S.Ct. 421. While it may be difficult to
refine Katz when the search of areas such as telephone booths, automobiles,
or even the curtilage and uncovered portions of residences is at issue, in the
case of the search of the interior of homes—the prototypical and hence most
commonly litigated area of protected privacy—there is a ready criterion, with
roots deep in the common law, of the minimal expectation of privacy that
exists, and that is acknowledged to be reasonable. To withdraw protection of
this minimum expectation would be to permit police technology to erode the
privacy guaranteed by the Fourth Amendment. We think that obtaining by
sense-enhancing technology any information regarding the interior of the
home that could not otherwise have been obtained without physical
“intrusion into a constitutionally protected area,” Silverman, 365 U.S., at
512, 81 S.Ct. 679, constitutes a search—at least where (as here) the
technology in question is not in general public use. This assures preservation
of that degree of privacy against government that existed when the Fourth
Amendment was adopted. On the basis of this criterion, the information
obtained by the thermal imager in this case was the product of a search.
The Government maintains, however, that the thermal imaging must be
upheld because it detected “only heat radiating from the external surface of
the house,” Brief for United States 26. The dissent makes this its leading
point, see post, at 2047, contending that there is a fundamental difference
between what it calls “off-the-wall” observations and “through-the-wall
surveillance.” But just as a thermal imager captures only heat emanating
196
from a house, so also a powerful directional microphone picks up only sound
emanating from a house-and a satellite capable of scanning from many
miles away would pick up only visible light emanating from a house. We
rejected such a mechanical interpretation of the Fourth Amendment in Katz,
where the eavesdropping device picked up only sound waves that reached
the exterior of the phone booth. Reversing that approach would leave the
homeowner at the mercy of advancing technology—including imaging
technology that could discern all human activity in the home. While the
technology used in the present case was relatively crude, the rule we adopt
must take account of more sophisticated systems that are already in use or
in development. The dissent's reliance on the distinction between “off-thewall” and “through-the-wall” observation is entirely incompatible with the
dissent's belief, which we discuss below, that thermal-imaging observations
of the intimate details of a home are impermissible. The most sophisticated
thermal-imaging devices continue to measure heat “off-the-wall” rather than
“through-the-wall”; the dissent's disapproval of those more sophisticated
thermal-imaging devices, see post, at 2051, is an acknowledgement that
there is no substance to this distinction. As for the dissent's extraordinary
assertion that anything learned through “an inference” cannot be a search,
see post, at 2048–2049, that would validate even the “through-the-wall”
technologies that the dissent purports to disapprove. Surely the dissent does
not believe that the through-the-wall radar or ultrasound technology
produces an 8–by–10 Kodak glossy that needs no analysis (i.e., the making
of inferences). And, of course, the novel proposition that inference insulates
a search is blatantly contrary to United States v. Karo, 468 U.S. 705, 104
S.Ct. 3296, 82 L.Ed.2d 530 (1984), where the police “inferred” from the
activation of a beeper that a certain can of ether was in the home. The police
activity was held to be a search, and the search was held unlawful.
The Government also contends that the thermal imaging was
constitutional because it did not “detect private activities occurring in private
areas,” Brief for United States 22. It points out that in Dow Chemical we
observed that the enhanced aerial photography did not reveal any “intimate
details.” 476 U.S., at 238, 106 S.Ct. 1819. Dow Chemical, however, involved
enhanced aerial photography of an industrial complex, which does not share
the Fourth Amendment sanctity of the home. The Fourth Amendment's
protection of the home has never been tied to measurement of the quality or
quantity of information obtained. In Silverman, for example, we made clear
that any physical invasion of the structure of the home, “by even a fraction
of an inch,” was too much, 365 U.S., at 512, 81 S.Ct. 679, and there is
certainly no exception to the warrant requirement for the officer who barely
cracks open the front door and sees nothing but the nonintimate rug on the
vestibule floor. In the home, our cases show, all details are intimate details,
because the entire area is held safe from prying government eyes. Thus, in
Karo, supra, the only thing detected was a can of ether in the home; and in
197
Arizona v. Hicks, 480 U.S. 321, 107 S.Ct. 1149, 94 L.Ed.2d 347 (1987), the
only thing detected by a physical search that went beyond what officers
lawfully present could observe in “plain view” was the registration number of
a phonograph turntable. These were intimate details because they were
details of the home, just as was the detail of how warm—or even how
relatively warm—Kyllo was heating his residence.
Limiting the prohibition of thermal imaging to “intimate details” would not
only be wrong in principle; it would be impractical in application, failing to
provide “a workable accommodation between the needs of law enforcement
and the interests protected by the Fourth Amendment,” Oliver v. United
States, 466 U.S. 170, 181, 104 S.Ct. 1735, 80 L.Ed.2d 214 (1984). To begin
with, there is no necessary connection between the sophistication of the
surveillance equipment and the “intimacy” of the details that it observes—
which means that one cannot say (and the police cannot be assured) that
use of the relatively crude equipment at issue here will always be lawful. The
Agema Thermovision 210 might disclose, for example, at what hour each
night the lady of the house takes her daily sauna and bath—a detail that
many would consider “intimate”; and a much more sophisticated system
might detect nothing more intimate than the fact that someone left a closet
light on. We could not, in other words, develop a rule approving only that
through-the-wall surveillance which identifies objects no smaller than 36 by
36 inches, but would have to develop a jurisprudence specifying which home
activities are “intimate” and which are not. And even when (if ever) that
jurisprudence were fully developed, no police officer would be able to know
in advance whether his through-the-wall surveillance picks up “intimate”
details—and thus would be unable to know in advance whether it is
constitutional.
The dissent's proposed standard—whether the technology offers the
“functional equivalent of actual presence in the area being searched,” post,
at 2050—would seem quite similar to our own at first blush. The dissent
concludes that Katz was such a case, but then inexplicably asserts that if the
same listening device only revealed the volume of the conversation, the
surveillance would be permissible, post, at 2051. Yet if, without technology,
the police could not discern volume without being actually present in the
phone booth, Justice STEVENS should conclude a search has occurred. Cf.
Karo, 468 U.S., at 735, 104 S.Ct. 3296 (STEVENS, J., concurring in part and
dissenting in part) (“I find little comfort in the Court's notion that no invasion
of privacy occurs until a listener obtains some significant information by use
of the device .... A bathtub is a less private area when the plumber is
present even if his back is turned”). The same should hold for the interior
heat of the home if only a person present in the home could discern the
heat. Thus the driving force of the dissent, despite its recitation of the above
standard, appears to be a distinction among different types of information—
whether the “homeowner would even care if anybody noticed,” post, at
198
2051. The dissent offers no practical guidance for the application of this
standard, and for reasons already discussed, we believe there can be none.
The people in their houses, as well as the police, deserve more precision.6
We have said that the Fourth Amendment draws “a firm line at the
entrance to the house,” Payton, 445 U.S., at 590, 100 S.Ct. 1371. That line,
we think, must be not only firm but also bright—which requires clear
specification of those methods of surveillance that require a warrant. While it
is certainly possible to conclude from the videotape of the thermal imaging
that occurred in this case that no “significant” compromise of the
homeowner's privacy has occurred, we must take the long view, from the
original meaning of the Fourth Amendment forward.
“The Fourth Amendment is to be construed in the light of what was
deemed an unreasonable search and seizure when it was adopted, and in a
manner which will conserve public interests as well as the interests and
rights of individual citizens.” Carroll v. United States, 267 U.S. 132, 149,
45 S.Ct. 280, 69 L.Ed. 543 (1925).
Where, as here, the Government uses a device that is not in general
public use, to explore details of the home that would previously have been
unknowable without physical intrusion, the surveillance is a “search” and is
presumptively unreasonable without a warrant.
Since we hold the Thermovision imaging to have been an unlawful search,
it will remain for the District Court to determine whether, without the
evidence it provided, the search warrant issued in this case was supported
by probable cause—and if not, whether there is any other basis for
supporting admission of the evidence that the search pursuant to the
warrant produced.
The judgment of the Court of Appeals is reversed; the case is remanded
for further proceedings consistent with this opinion.
It is so ordered.
Justice STEVENS, with whom THE CHIEF JUSTICE, Justice O'CONNOR, and
The dissent argues that we have injected potential uncertainty into the
constitutional analysis by noting that whether or not the technology is in
general public use may be a factor. See post, at 2050. That quarrel,
however, is not with us but with this Court's precedent. See Ciraolo, supra,
at 215, 106 S.Ct. 1809 (“In an age where private and commercial flight in
the public airways is routine, it is unreasonable for respondent to expect that
his marijuana plants were constitutionally protected from being observed
with the naked eye from an altitude of 1,000 feet”). Given that we can quite
confidently say that thermal imaging is not “routine,” we decline in this case
to reexamine that factor.
6
199
Justice KENNEDY join, dissenting.
There is, in my judgment, a distinction of constitutional magnitude
between “through-the-wall surveillance” that gives the observer or listener
direct access to information in a private area, on the one hand, and the
thought processes used to draw inferences from information in the public
domain, on the other hand. The Court has crafted a rule that purports to
deal with direct observations of the inside of the home, but the case before
us merely involves indirect deductions from “off-the-wall” surveillance, that
is, observations of the exterior of the home. Those observations were made
with a fairly primitive thermal imager that gathered data exposed on the
outside of petitioner's home but did not invade any constitutionally protected
interest in privacy. Moreover, I believe that the supposedly “bright-line” rule
the Court has created in response to its concerns about future technological
developments is unnecessary, unwise, and inconsistent with the Fourth
Amendment.
I
There is no need for the Court to craft a new rule to decide this case, as it
is controlled by established principles from our Fourth Amendment
jurisprudence. One of those core principles, of course, is that “searches and
seizures inside a home without a warrant are presumptively unreasonable.”
Payton v. New York, 445 U.S. 573, 586, 100 S.Ct. 1371, 63 L.Ed.2d 639
(1980) (emphasis added). But it is equally well settled that searches and
seizures of property in plain view are presumptively reasonable. See id., at
586–587, 100 S.Ct. 1371. Whether that property is residential or
commercial, the basic principle is the same: “ ‘What a person knowingly
exposes to the public, even in his own home or office, is not a subject of
Fourth Amendment protection.’ ” California v. Ciraolo, 476 U.S. 207, 213,
106 S.Ct. 1809, 90 L.Ed.2d 210 (1986) (quoting Katz v. United States, 389
U.S. 347, 351, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967)); see Florida v. Riley,
488 U.S. 445, 449–450, 109 S.Ct. 693, 102 L.Ed.2d 835 (1989); California
v. Greenwood, 486 U.S. 35, 40–41, 108 S.Ct. 1625, 100 L.Ed.2d 30 (1988);
Dow Chemical Co. v. United States, 476 U.S. 227, 235–236, 106 S.Ct. 1819,
90 L.Ed.2d 226 (1986); Air Pollution Variance Bd. of Colo. v. Western Alfalfa
Corp., 416 U.S. 861, 865, 94 S.Ct. 2114, 40 L.Ed.2d 607 (1974). That is the
principle implicated here.
While the Court “take[s] the long view” and decides this case based
largely on the potential of yet-to-be-developed technology that might allow
“through-the-wall surveillance,” ante, at 2045–2046; see ante, at 2044, n.
3, this case involves nothing more than off-the-wall surveillance by law
enforcement officers to gather information exposed to the general public
from the outside of petitioner's home. All that the infrared camera did in this
case was passively measure heat emitted from the exterior surfaces of
petitioner's home; all that those measurements showed were relative
200
differences in emission levels, vaguely indicating that some areas of the roof
and outside walls were warmer than others. As still images from the infrared
scans show, see Appendix, infra, no details regarding the interior of
petitioner's home were revealed. Unlike an x-ray scan, or other possible
“through-the-wall” techniques, the detection of infrared radiation emanating
from the home did not accomplish “an unauthorized physical penetration
into the premises,” Silverman v. United States, 365 U.S. 505, 509, 81 S.Ct.
679, 5 L.Ed.2d 734 (1961), nor did it “obtain information that it could not
have obtained by observation from outside the curtilage of the house,”
United States v. Karo, 468 U.S. 705, 715, 104 S.Ct. 3296, 82 L.Ed.2d 530
(1984).
Indeed, the ordinary use of the senses might enable a neighbor or
passerby to notice the heat emanating from a building, particularly if it is
vented, as was the case here. Additionally, any member of the public might
notice that one part of a house is warmer than another part or a nearby
building if, for example, rainwater evaporates or snow melts at different
rates across its surfaces. Such use of the senses would not convert into an
unreasonable search if, instead, an adjoining neighbor allowed an officer
onto her property to verify her perceptions with a sensitive thermometer.
Nor, in my view, does such observation become an unreasonable search if
made from a distance with the aid of a device that merely discloses that the
exterior of one house, or one area of the house, is much warmer than
another. Nothing more occurred in this case.
Thus, the notion that heat emissions from the outside of a dwelling are a
private matter implicating the protections of the Fourth Amendment (the
text of which guarantees the right of people “to be secure in their ... houses”
against unreasonable searches and seizures (emphasis added)) is not only
unprecedented but also quite difficult to take seriously. Heat waves, like
aromas that are generated in a kitchen, or in a laboratory or opium den,
enter the public domain if and when they leave a building. A subjective
expectation that they would remain private is not only implausible but also
surely not “one that society is prepared to recognize as ‘reasonable.’ ” Katz,
389 U.S., at 361, 88 S.Ct. 507 (Harlan, J., concurring).
To be sure, the homeowner has a reasonable expectation of privacy
concerning what takes place within the home, and the Fourth Amendment's
protection against physical invasions of the home should apply to their
functional equivalent. But the equipment in this case did not penetrate the
walls of petitioner's home, and while it did pick up “details of the home” that
were exposed to the public, ante, at 2045, it did not obtain “any information
regarding the interior of the home,” ante, at 2043 (emphasis added). In the
Court's own words, based on what the thermal imager “showed” regarding
the outside of petitioner's home, the officers “concluded” that petitioner was
engaging in illegal activity inside the home. Ante, at 2041. It would be quite
absurd to characterize their thought processes as “searches,” regardless of
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whether they inferred (rightly) that petitioner was growing marijuana in his
house, or (wrongly) that “the lady of the house [was taking] her daily sauna
and bath.” Ante, at 2045. In either case, the only conclusions the officers
reached concerning the interior of the home were at least as indirect as
those that might have been inferred from the contents of discarded garbage,
see California v. Greenwood, 486 U.S. 35, 108 S.Ct. 1625, 100 L.Ed.2d 30
(1988), or pen register data, see Smith v. Maryland, 442 U.S. 735, 99 S.Ct.
2577, 61 L.Ed.2d 220 (1979), or, as in this case, subpoenaed utility records,
see 190 F.3d 1041, 1043 (C.A.9 1999). For the first time in its history, the
Court assumes that an inference can amount to a Fourth Amendment
violation. See ante, at 2044–2045.
Notwithstanding the implications of today's decision, there is a strong
public interest in avoiding constitutional litigation over the monitoring of
emissions from homes, and over the inferences drawn from such monitoring.
Just as “the police cannot reasonably be expected to avert their eyes from
evidence of criminal activity that could have been observed by any member
of the public,” Greenwood, 486 U.S., at 41, 108 S.Ct. 1625, so too public
officials should not have to avert their senses or their equipment from
detecting emissions in the public domain such as excessive heat, traces of
smoke, suspicious odors, odorless gases, airborne particulates, or
radioactive emissions, any of which could identify hazards to the community.
In my judgment, monitoring such emissions with “sense-enhancing
technology,” ante, at 2043, and drawing useful conclusions from such
monitoring, is an entirely reasonable public service.
On the other hand, the countervailing privacy interest is at best trivial.
After all, homes generally are insulated to keep heat in, rather than to
prevent the detection of heat going out, and it does not seem to me that
society will suffer from a rule requiring the rare homeowner who both
intends to engage in uncommon activities that produce extraordinary
amounts of heat, and wishes to conceal that production from outsiders, to
make sure that the surrounding area is well insulated. Cf. United States v.
Jacobsen, 466 U.S. 109, 122, 104 S.Ct. 1652, 80 L.Ed.2d 85 (1984) (“The
concept of an interest in privacy that society is prepared to recognize as
reasonable is, by its very nature, critically different from the mere
expectation, however well justified, that certain facts will not come to the
attention of the authorities”). The interest in concealing the heat escaping
from one's house pales in significance to “the chief evil against which the
wording of the Fourth Amendment is directed,” the “physical entry of the
home,” United States v. United States Dist. Court for Eastern Dist. of Mich.,
407 U.S. 297, 313, 92 S.Ct. 2125, 32 L.Ed.2d 752 (1972), and it is hard to
believe that it is an interest the Framers sought to protect in our
Constitution.
Since what was involved in this case was nothing more than drawing
inferences from off-the-wall surveillance, rather than any “through-the-wall”
202
surveillance, the officers' conduct did not amount to a search and was
perfectly reasonable.
II
Instead of trying to answer the question whether the use of the thermal
imager in this case was even arguably unreasonable, the Court has
fashioned a rule that is intended to provide essential guidance for the day
when “more sophisticated systems” gain the “ability to ‘see’ through walls
and other opaque barriers.” Ante, at 2044, and n. 3. The newly minted rule
encompasses “obtaining [1] by sense-enhancing technology [2] any
information regarding the interior of the home [3] that could not otherwise
have been obtained without physical intrusion into a constitutionally
protected area ... [4] at least where (as here) the technology in question is
not in general public use.” Ante, at 2043 (internal quotation marks omitted).
In my judgment, the Court's new rule is at once too broad and too narrow,
and is not justified by the Court's explanation for its adoption. As I have
suggested, I would not erect a constitutional impediment to the use of
sense-enhancing technology unless it provides its user with the functional
equivalent of actual presence in the area being searched.
Despite the Court's attempt to draw a line that is “not only firm but also
bright,” ante, at 2046, the contours of its new rule are uncertain because its
protection apparently dissipates as soon as the relevant technology is “in
general public use,” ante, at 2043. Yet how much use is general public use is
not even hinted at by the Court's opinion, which makes the somewhat
doubtful assumption that the thermal imager used in this case does not
satisfy that criterion. In any event, putting aside its lack of clarity, this
criterion is somewhat perverse because it seems likely that the threat to
privacy will grow, rather than recede, as the use of intrusive equipment
becomes more readily available.
It is clear, however, that the category of “sense-enhancing technology”
covered by the new rule, ibid., is far too broad. It would, for example,
embrace potential mechanical substitutes for dogs trained to react when
they sniff narcotics. But in United States v. Place, 462 U.S. 696, 707, 103
S.Ct. 2637, 77 L.Ed.2d 110 (1983), we held that a dog sniff that “discloses
only the presence or absence of narcotics” does “not constitute a ‘search’
within the meaning of the Fourth Amendment,” and it must follow that
sense-enhancing equipment that identifies nothing but illegal activity is not a
search either. Nevertheless, the use of such a device would be
unconstitutional under the Court's rule, as would the use of other new
devices that might detect the odor of deadly bacteria or chemicals for
making a new type of high explosive, even if the devices (like the dog sniffs)
are “so limited both in the manner in which” they obtain information and “in
the content of the information” they reveal. Ibid. If nothing more than that
203
sort of information could be obtained by using the devices in a public place
to monitor emissions from a house, then their use would be no more
objectionable than the use of the thermal imager in this case.
The application of the Court's new rule to “any information regarding the
interior of the home,” ante, at 2043, is also unnecessarily broad. If it takes
sensitive equipment to detect an odor that identifies criminal conduct and
nothing else, the fact that the odor emanates from the interior of a home
should not provide it with constitutional protection. See supra, at 2050 and
this page. The criterion, moreover, is too sweeping in that information
“regarding” the interior of a home apparently is not just information
obtained through its walls, but also information concerning the outside of the
building that could lead to (however many) inferences “regarding” what
might be inside. Under that expansive view, I suppose, an officer using an
infrared camera to observe a man silently entering the side door of a house
at night carrying a pizza might conclude that its interior is now occupied by
someone who likes pizza, and by doing so the officer would be guilty of
conducting an unconstitutional “search” of the home.
Because the new rule applies to information regarding the “interior” of the
home, it is too narrow as well as too broad. Clearly, a rule that is designed
to protect individuals from the overly intrusive use of sense-enhancing
equipment should not be limited to a home. If such equipment did provide
its user with the functional equivalent of access to a private place—such as,
for example, the telephone booth involved in Katz, or an office building—
then the rule should apply to such an area as well as to a home. See Katz,
389 U.S., at 351, 88 S.Ct. 507 (“[T]he Fourth Amendment protects people,
not places”).
The final requirement of the Court's new rule, that the information “could
not otherwise have been obtained without physical intrusion into a
constitutionally protected area,” ante, at 2043 (internal quotation marks
omitted), also extends too far as the Court applies it. As noted, the Court
effectively treats the mental process of analyzing data obtained from
external sources as the equivalent of a physical intrusion into the home. See
supra, at 2048–2049. As I have explained, however, the process of drawing
inferences from data in the public domain should not be characterized as a
search.
The two reasons advanced by the Court as justifications for the adoption
of its new rule are both unpersuasive. First, the Court suggests that its rule
is compelled by our holding in Katz, because in that case, as in this, the
surveillance consisted of nothing more than the monitoring of waves
emanating from a private area into the public domain. See ante, at 2044.
Yet there are critical differences between the cases. In Katz, the electronic
listening device attached to the outside of the phone booth allowed the
officers to pick up the content of the conversation inside the booth, making
them the functional equivalent of intruders because they gathered
204
information that was otherwise available only to someone inside the private
area; it would be as if, in this case, the thermal imager presented a view of
the heat-generating activity inside petitioner's home. By contrast, the
thermal imager here disclosed only the relative amounts of heat radiating
from the house; it would be as if, in Katz, the listening device disclosed only
the relative volume of sound leaving the booth, which presumably was
discernible in the public domain. Surely, there is a significant difference
between the general and well-settled expectation that strangers will not
have direct access to the contents of private communications, on the one
hand, and the rather theoretical expectation that an occasional homeowner
would even care if anybody noticed the relative amounts of heat emanating
from the walls of his house, on the other. It is pure hyperbole for the Court
to suggest that refusing to extend the holding of Katz to this case would
leave the homeowner at the mercy of “technology that could discern all
human activity in the home.” Ante, at 2044.
Second, the Court argues that the permissibility of “through-the-wall
surveillance” cannot depend on a distinction between observing “intimate
details” such as “the lady of the house [taking] her daily sauna and bath,”
and noticing only “the nonintimate rug on the vestibule floor” or “objects no
smaller than 36 by 36 inches.” Ante, at 2045–2046. This entire argument
assumes, of course, that the thermal imager in this case could or did
perform “through-the-wall surveillance” that could identify any detail “that
would previously have been unknowable without physical intrusion.” Ante, at
2046. In fact, the device could not, see n. 1, supra, and did not, see
Appendix, infra, enable its user to identify either the lady of the house, the
rug on the vestibule floor, or anything else inside the house, whether smaller
or larger than 36 by 36 inches. Indeed, the vague thermal images of
petitioner's home that are reproduced in the Appendix were submitted by
him to the District Court as part of an expert report raising the question
whether the device could even take “accurate, consistent infrared images” of
the outside of his house. Defendant's Exh. 107, p. 4. But even if the device
could reliably show extraordinary differences in the amounts of heat leaving
his home, drawing the inference that there was something suspicious
occurring inside the residence—a conclusion that officers far less gifted than
Sherlock Holmes would readily draw—does not qualify as “through-the-wall
surveillance,” much less a Fourth Amendment violation.
III
Although the Court is properly and commendably concerned about the
threats to privacy that may flow from advances in the technology available
to the law enforcement profession, it has unfortunately failed to heed the
tried and true counsel of judicial restraint. Instead of concentrating on the
rather mundane issue that is actually presented by the case before it, the
Court has endeavored to craft an all-encompassing rule for the future. It
205
would be far wiser to give legislators an unimpeded opportunity to grapple
with these emerging issues rather than to shackle them with prematurely
devised constitutional constraints.
I respectfully dissent.
APPENDIX
Smith v. Maryland
442 U.S. 735 (1979)
Mr. Justice BLACKMUN delivered the opinion of the Court.
This case presents the question whether the installation and use of a pen
register12 constitutes a “search” within the meaning of the Fourth
“A pen register is a mechanical device that records the numbers dialed on
a telephone by monitoring the electrical impulses caused when the dial on
the telephone is released. It does not overhear oral communications and
12
206
Amendment,13 made applicable to the States through the Fourteenth
Amendment. Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081
(1961).
I
On March 5, 1976, in Baltimore, Md., Patricia McDonough was robbed.
She gave the police a description of the robber and of a 1975 Monte Carlo
automobile she had observed near the scene of the crime. Tr. 66–68. After
the robbery, McDonough began receiving threatening and obscene phone
calls from a man identifying himself as the robber. On one occasion, the
caller asked that she step out on her front porch; she did so, and saw the
1975 Monte Carlo she had earlier described to police moving slowly past her
home. Id., at 70. On March 16, police spotted a man who met McDonough's
description driving a 1975 Monte Carlo in her neighborhood. Id., at 71–72.
By tracing the license plate number, police learned that the car was
registered in the name of petitioner, Michael Lee Smith. Id., at 72.
The next day, the telephone company, at police request, installed a pen
register at its central offices to record the numbers dialed from the
telephone at petitioner's home. Id., at 73, 75. The police did not get a
warrant or court order before having the pen register installed. The register
revealed that on March 17 a call was placed from petitioner's home to
McDonough's phone. Id., at 74. On the basis of this and other evidence, the
police obtained a warrant to search petitioner's residence. Id., at 75. The
search revealed that a page in petitioner's phone book was turned down to
the name and number of Patricia McDonough; the phone book was seized.
Ibid. Petitioner was arrested, and a six-man lineup was held on March 19.
McDonough identified petitioner as the man who had robbed her. Id., at 70–
71.
Petitioner was indicted in the Criminal Court of Baltimore for robbery. By
pretrial motion, he sought to suppress “all fruits derived from the pen
does not indicate whether calls are actually completed.” United States v.
New York Tel. Co., 434 U.S. 159, 161 n. 1, 98 S.Ct. 364, 366 n. 1, 54
L.Ed.2d 376 (1977). A pen register is “usually installed at a central
telephone facility [and] records on a paper tape all numbers dialed from
[the] line” to which it is attached. United States v. Giordano, 416 U.S. 505,
549 n. 1, 94 S.Ct. 1820, 1842 n. 1, 40 L.Ed.2d 341 (1974) (opinion
concurring in part and dissenting in part). See also United States v. New
York Tel. Co., 434 U.S., at 162, 98 S.Ct., at 367.
“The right of the people to be secure in their persons, houses, papers, and
effects, against unreasonable searches and seizures, shall not be violated, and no
Warrants shall issue, but upon probable cause, supported by Oath or affirmation,
and particularly describing the place to be searched, and the persons or things to
be seized.” U.S.Const., Amdt. 4
13
207
register” on the ground that the police had failed to secure a warrant prior to
its installation. Record 14; Tr. 54–56. The trial court denied the suppression
motion, holding that the warrantless installation of the pen register did not
violate the Fourth Amendment. Id., at 63. Petitioner then waived a jury, and
the case was submitted to the court on an agreed statement of facts. Id., at
65–66. The pen register tape (evidencing the fact that a phone call had been
made from petitioner's phone to McDonough's phone) and the phone book
seized in the search of petitioner's residence were admitted into evidence
against him. Id., at 74–76. Petitioner was convicted, id., at 78, and was
sentenced to six years. He appealed to the Maryland Court of Special
Appeals, but the Court of Appeals of Maryland issued a writ of certiorari to
the intermediate court in advance of its decision in order to consider whether
the pen register evidence had been properly admitted at petitioner's trial.
283 Md. 156, 160, 389 A.2d 858, 860 (1978).
The Court of Appeals affirmed the judgment of conviction, holding that
“there is no constitutionally protected reasonable expectation of privacy in
the numbers dialed into a telephone system and hence no search within the
fourth amendment is implicated by the use of a pen register installed at the
central offices of the telephone company.” Id., at 173, 389 A.2d, at 867.
Because there was no “search,” the court concluded, no warrant was
needed. Three judges dissented, expressing the view that individuals do
have a legitimate expectation of privacy regarding the phone numbers they
dial from their homes; that the installation of a pen register thus constitutes
a “search”; and that, in the absence of exigent circumstances, the failure of
police to secure a warrant mandated that the pen register evidence here be
excluded. Id., at 174, 178, 389 A.2d, at 868, 870. Certiorari was granted in
order to resolve indications of conflict in the decided cases as to the
restrictions imposed by the Fourth Amendment on the use of pen registers.
439 U.S. 1001, 99 S.Ct. 609, 58 L.Ed.2d 676 (1978).
II
A
The Fourth Amendment guarantees “[t]he right of the people to be
secure in their persons, houses, papers, and effects, against unreasonable
searches and seizures.” In determining whether a particular form of
government-initiated electronic surveillance is a “search” within the meaning
of the Fourth Amendment,4 our lodestar is Katz v. United States, 389 U.S.
In this case, the pen register was installed, and the numbers dialed were
recorded, by the telephone company. Tr. 73–74. The telephone company,
however, acted at police request. Id., at 73, 75. In view of this, respondent
appears to concede that the company is to be deemed an “agent” of the
police for purposes of this case, so as to render the installation and use of
4
208
347, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967). In Katz, Government agents had
intercepted the contents of a telephone conversation by attaching an
electronic listening device to the outside of a public phone booth. The Court
rejected the argument that a “search” can occur only when there has been a
“physical intrusion” into a “constitutionally protected area,” noting that the
Fourth Amendment “protects people, not places.” Id., at 351–353, 88 S.Ct.,
at 511–512. Because the Government's monitoring of Katz' conversation
“violated the privacy upon which he justifiably relied while using the
telephone booth,” the Court held that it “constituted a ‘search and seizure’
within the meaning of the Fourth Amendment.” Id., at 353, 88 S.Ct., at 512.
Consistently with Katz, this Court uniformly has held that the application
of the Fourth Amendment depends on whether the person invoking its
protection can claim a “justifiable,” a “reasonable,” or a “legitimate
expectation of privacy” that has been invaded by government action. This
inquiry, as Mr. Justice Harlan aptly noted in his Katz concurrence, normally
embraces two discrete questions. The first is whether the individual, by his
conduct, has “exhibited an actual (subjective) expectation of privacy,” 389
U.S., at 361, 88 S.Ct., at 516—whether, in the words of the Katz majority,
the individual has shown that “he seeks to preserve [something] as private.”
Id., at 351, 88 S.Ct., at 511. The second question is whether the individual's
subjective expectation of privacy is “one that society is prepared to
recognize as ‘reasonable,’ ” id., at 361, 88 S.Ct., at 516—whether, in the
words of the Katz majority, the individual's expectation, viewed objectively,
is “justifiable” under the circumstances. Id., at 353, 88 S.Ct., at 512.5
the pen register “state action” under the Fourth and Fourteenth
Amendments. We may assume that “state action” was present here.
Situations can be imagined, of course, in which Katz' two-pronged inquiry
would provide an inadequate index of Fourth Amendment protection. For
example, if the Government were suddenly to announce on nationwide
television that all homes henceforth would be subject to warrantless entry,
individuals thereafter might not in fact entertain any actual expectation or
privacy regarding their homes, papers, and effects. Similarly, if a refugee
from a totalitarian country, unaware of this Nation's traditions, erroneously
assumed that police were continuously monitoring his telephone
conversations, a subjective expectation of privacy regarding the contents of
his calls might be lacking as well. In such circumstances, where an
individual's subjective expectations had been “conditioned” by influences
alien to well-recognized Fourth Amendment freedoms, those subjective
expectations obviously could play no meaningful role in ascertaining what
the scope of Fourth Amendment protection was. In determining whether a
“legitimate expectation of privacy” existed in such cases, a normative inquiry
would be proper.
5
209
B
In applying the Katz analysis to this case, it is important to begin by
specifying precisely the nature of the state activity that is challenged. The
activity here took the form of installing and using a pen register. Since the
pen register was installed on telephone company property at the telephone
company's central offices, petitioner obviously cannot claim that his
“property” was invaded or that police intruded into a “constitutionally
protected area.” Petitioner's claim, rather, is that, notwithstanding the
absence of a trespass, the State, as did the Government in Katz, infringed a
“legitimate expectation of privacy” that petitioner held. Yet a pen register
differs significantly from the listening device employed in Katz, for pen
registers do not acquire the contents of communications. This Court recently
noted:
“Indeed, a law enforcement official could not even determine from the
use of a pen register whether a communication existed. These devices do
not hear sound. They disclose only the telephone numbers that have been
dialed—a means of establishing communication. Neither the purport of any
communication between the caller and the recipient of the call, their
identities, nor whether the call was even completed is disclosed by pen
registers.” United States v. New York Tel. Co., 434 U.S. 159, 167, 98 S.Ct.
364, 369, 54 L.Ed.2d 376 (1977).
Given a pen register's limited capabilities, therefore, petitioner's
argument that its installation and use constituted a “search” necessarily
rests upon a claim that he had a “legitimate expectation of privacy”
regarding the numbers he dialed on his phone.
This claim must be rejected. First, we doubt that people in general
entertain any actual expectation of privacy in the numbers they dial. All
telephone users realize that they must “convey” phone numbers to the
telephone company, since it is through telephone company switching
equipment that their calls are completed. All subscribers realize, moreover,
that the phone company has facilities for making permanent records of the
numbers they dial, for they see a list of their long-distance (toll) calls on
their monthly bills. In fact, pen registers and similar devices are routinely
used by telephone companies “for the purposes of checking billing
operations, detecting fraud and preventing violations of law.” United States
v. New York Tel. Co., 434 U.S., at 174–175, 98 S.Ct., at 373. Electronic
equipment is used not only to keep billing records of toll calls, but also “to
keep a record of all calls dialed from a telephone which is subject to a special
rate structure.” Hodge v. Mountain States Tel. & Tel. Co., 555 F.2d 254, 266
(CA9 1977) (concurring opinion). Pen registers are regularly employed “to
determine whether a home phone is being used to conduct a business, to
210
check for a defective dial, or to check for overbilling.” Note, The Legal
Constraints upon the Use of the Pen Register as a Law Enforcement Tool, 60
Cornell L.Rev. 1028, 1029 (1975) (footnotes omitted). Although most people
may be oblivious to a pen register's esoteric functions, they presumably
have some awareness of one common use: to aid in the identification of
persons making annoying or obscene calls. See, e. g., Von Lusch v. C & P
Telephone Co., 457 F.Supp. 814, 816 (Md.1978); Note, 60 Cornell L.Rev., at
1029–1030, n. 11; Claerhout, The Pen Register, 20 Drake L.Rev. 108, 110–
111 (1970). Most phone books tell subscribers, on a page entitled
“Consumer Information,” that the company “can frequently help in
identifying to the authorities the origin of unwelcome and troublesome calls.”
E. g., Baltimore Telephone Directory 21 (1978); District of Columbia
Telephone Directory 13 (1978). Telephone users, in sum, typically know that
they must convey numerical information to the phone company; that the
phone company has facilities for recording this information; and that the
phone company does in fact record this information for a variety of
legitimate business purposes. Although subjective expectations cannot be
scientifically gauged, it is too much to believe that telephone subscribers,
under these circumstances, harbor any general expectation that the
numbers they dial will remain secret.
Petitioner argues, however, that, whatever the expectations of telephone
users in general, he demonstrated an expectation of privacy by his own
conduct here, since he “us[ed] the telephone in his house to the exclusion of
all others.” Brief for Petitioner 6 (emphasis added). But the site of the call is
immaterial for purposes of analysis in this case. Although petitioner's
conduct may have been calculated to keep the contents of his conversation
private, his conduct was not and could not have been calculated to preserve
the privacy of the number he dialed. Regardless of his location, petitioner
had to convey that number to the telephone company in precisely the same
way if he wished to complete his call. The fact that he dialed the number on
his home phone rather than on some other phone could make no
conceivable difference, nor could any subscriber rationally think that it
would.
Second, even if petitioner did harbor some subjective expectation that
the phone numbers he dialed would remain private, this expectation is not
“one that society is prepared to recognize as ‘reasonable.’ ” Katz v. United
States, 389 U.S., at 361, 88 S.Ct., at 516. This Court consistently has held
that a person has no legitimate expectation of privacy in information he
voluntarily turns over to third parties. E. g., United States v. Miller, 425
U.S., at 442–444, 96 S.Ct., at 1623–1624; Couch v. United States, 409
U.S., at 335–336, 93 S.Ct., at 619–620; United States v. White, 401 U.S., at
752, 91 S.Ct., at 1126 (plurality opinion); Hoffa v. United States, 385 U.S.
293, 302, 87 S.Ct. 408, 413, 17 L.Ed.2d 374 (1966); Lopez v. United States,
373 U.S. 427, 83 S.Ct. 1381, 10 L.Ed.2d 462 (1963). In Miller, for example,
211
the Court held that a bank depositor has no “legitimate ‘expectation of
privacy’ ” in financial information “voluntarily conveyed to . . . banks and
exposed to their employees in the ordinary course of business.” 425 U.S., at
442, 96 S.Ct., at 1624. The Court explained:
“The depositor takes the risk, in revealing his affairs to another, that the
information will be conveyed by that person to the Government. . . . This
Court has held repeatedly that the Fourth Amendment does not prohibit the
obtaining of information revealed to a third party and conveyed by him to
Government authorities, even if the information is revealed on the
assumption that it will be used only for a limited purpose and the confidence
placed in the third party will not be betrayed.” Id., at 443, 96 S.Ct., at 1624.
Because the depositor “assumed the risk” of disclosure, the Court held
that it would be unreasonable for him to expect his financial records to
remain private.
This analysis dictates that petitioner can claim no legitimate expectation
of privacy here. When he used his phone, petitioner voluntarily conveyed
numerical information to the telephone company and “exposed” that
information to its equipment in the ordinary course of business. In so doing,
petitioner assumed the risk that the company would reveal to police the
numbers he dialed. The switching equipment that processed those numbers
is merely the modern counterpart of the operator who, in an earlier day,
personally completed calls for the subscriber. Petitioner concedes that if he
had placed his calls through an operator, he could claim no legitimate
expectation of privacy. Tr. of Oral Arg. 3–5, 11–12, 32. We are not inclined
to hold that a different constitutional result is required because the
telephone company has decided to automate.
Petitioner argues, however, that automatic switching equipment differs
from a live operator in one pertinent respect. An operator, in theory at least,
is capable of remembering every number that is conveyed to him by callers.
Electronic equipment, by contrast can “remember” only those numbers it is
programmed to record, and telephone companies, in view of their present
billing practices, usually do not record local calls. Since petitioner, in calling
McDonough, was making a local call, his expectation of privacy as to her
number, on this theory, would be “legitimate.”
This argument does not withstand scrutiny. The fortuity of whether or
not the phone company in fact elects to make a quasi-permanent record of a
particular number dialed does not in our view, make any constitutional
difference. Regardless of the phone company's election, petitioner
voluntarily conveyed to it information that it had facilities for recording and
that it was free to record. In these circumstances, petitioner assumed the
risk that the information would be divulged to police. Under petitioner's
theory, Fourth Amendment protection would exist, or not, depending on how
212
the telephone company chose to define local-dialing zones, and depending
on how it chose to bill its customers for local calls. Calls placed across town,
or dialed directly, would be protected; calls placed across the river, or dialed
with operator assistance, might not be. We are not inclined to make a crazy
quilt of the Fourth Amendment, especially in circumstances where (as here)
the pattern of protection would be dictated by billing practices of a private
corporation.
We therefore conclude that petitioner in all probability entertained no
actual expectation of privacy in the phone numbers he dialed, and that, even
if he did, his expectation was not “legitimate.” The installation and use of a
pen register,*746 consequently, was not a “search,” and no warrant was
required. The judgment of the Maryland Court of Appeals is affirmed.
It is so ordered.
Mr. Justice POWELL took no part in the consideration or decision of this
case.
Mr. Justice STEWART, with whom Mr. Justice BRENNAN joins, dissenting.
I am not persuaded that the numbers dialed from a private telephone fall
outside the constitutional protection of the Fourth and Fourteenth
Amendments.
In Katz v. United States, 389 U.S. 347, 352, 88 S.Ct. 507, 512, 19
L.Ed.2d 576, the Court acknowledged the “vital role that the public
telephone has come to play in private communication[s].” The role played by
a private telephone is even more vital, and since Katz it has been
abundantly clear that telephone conversations carried on by people in their
homes or offices are fully protected by the Fourth and Fourteenth
Amendments. As the Court said in United States v. United States District
Court, 407 U.S. 297, 313, 92 S.Ct. 2125, 2135, 32 L.Ed.2d 752, “the broad
and unsuspected governmental incursions into conversational privacy which
electronic surveillance entails necessitate the application of Fourth
Amendment safeguards.” (Footnote omitted.)
Nevertheless, the Court today says that those safeguards do not extend
to the numbers dialed from a private telephone, apparently because when a
caller dials a number the digits may be recorded by the telephone company
for billing purposes. But that observation no more than describes the basic
nature of telephone calls. A telephone call simply cannot be made without
the use of telephone company property and without payment to the
company for the service. The telephone conversation itself must be
electronically transmitted by telephone company equipment, and may be
recorded or overheard by the use of other company equipment. Yet we have
squarely held that the user of even a public telephone is entitled “to assume
that the words he utters into the mouthpiece will not be broadcast to the
213
world.” Katz v. United States, supra, 389 U.S., at 352, 88 S.Ct., at 512.
The central question in this case is whether a person who makes
telephone calls from his home is entitled to make a similar assumption about
the numbers he dials. What the telephone company does or might do with
those numbers is no more relevant to this inquiry than it would be in a case
involving the conversation itself. It is simply not enough to say, after Katz,
that there is no legitimate expectation of privacy in the numbers dialed
because the caller assumes the risk that the telephone company will disclose
them to the police.
I think that the numbers dialed from a private telephone—like the
conversations that occur during a call—are within the constitutional
protection recognized in Katz. It seems clear to me that information
obtained by pen register surveillance of a private telephone is information in
which the telephone subscriber has a legitimate expectation of privacy. The
information captured by such surveillance emanates from private conduct
within a person's home or office—locations that without question are entitled
to Fourth and Fourteenth Amendment protection. Further, that information is
an integral part of the telephonic communication that under Katz is entitled
to constitutional protection, whether or not it is captured by a trespass into
such an area.
The numbers dialed from a private telephone—although certainly more
prosaic than the conversation itself—are not without “content.” Most private
telephone subscribers may have their own numbers listed in a publicly
distributed directory, but I doubt there are any who would be happy to have
broadcast to the world a list of the local or long distance numbers they have
called. This is not because such a list might in some sense be incriminating,
but because it easily could reveal the identities of the persons and the places
called, and thus reveal the most intimate details of a person's life.
I respectfully dissent.
Mr. Justice MARSHALL, with whom Mr. Justice BRENNAN joins, dissenting.
The Court concludes that because individuals have no actual or
legitimate expectation of privacy in information they voluntarily relinquish to
telephone companies, the use of pen registers by government agents is
immune from Fourth Amendment scrutiny. Since I remain convinced that
constitutional protections are not abrogated whenever a person apprises
another of facts valuable in criminal investigations, see, e. g., United States
v. White, 401 U.S. 745, 786–790, 91 S.Ct. 1122, 1143–1145, 28 L.Ed.2d
453 (1971) (Harlan, J., dissenting); id., at 795–796, 91 S.Ct., at 1147–1148
(MARSHALL, J., dissenting); California Bankers Assn. v. Shultz, 416 U.S. 21,
95–96, 94 S.Ct. 1494, 1534, 39 L.Ed.2d 812 (1974) (MARSHALL, J.,
dissenting); United States v. Miller, 425 U.S. 435, 455–456, 96 S.Ct. 1619,
1629–1630, 48 L.Ed.2d 71 (1976) (MARSHALL, J., dissenting), I respectfully
dissent.
214
Applying the standards set forth in Katz v. United States, 389 U.S. 347,
361, 88 S.Ct. 507, 516, 19 L.Ed.2d 576 (1967) (Harlan, J., concurring), the
Court first determines that telephone subscribers have no subjective
expectations of privacy concerning the numbers they dial. To reach this
conclusion, the Court posits that individuals somehow infer from the longdistance listings on their phone bills, and from the cryptic assurances of
“help” in tracing obscene calls included in “most” phone books, that pen
registers are regularly used for recording local calls. See ante, at 2581–
2582. But even assuming, as I do not, that individuals “typically know” that
a phone company monitors calls for internal reasons, ante, at 2581,1 it does
not follow that they expect this information to be made available to the
public in general or the government in particular. Privacy is not a discrete
commodity, possessed absolutely or not at all. Those who disclose certain
facts to a bank or phone company for a limited business purpose need not
assume that this information will be released to other persons for other
purposes. See California Bankers Assn. v. Shultz, supra, 416 U.S., at 95–96,
94 S.Ct., at 1534 (MARSHALL, J., dissenting).
The crux of the Court's holding, however, is that whatever expectation of
privacy petitioner may in fact have entertained regarding his calls, it is not
one “society is prepared to recognize as ‘reasonable’.” Ante, at 2582. In so
ruling, the Court determines that individuals who convey information to third
parties have “assumed the risk” of disclosure to the government. Ante, at
2582, 2583. This analysis is misconceived in two critical respects.
Implicit in the concept of assumption of risk is some notion of choice. At
least in the third-party consensual surveillance cases, which first
incorporated risk analysis into Fourth Amendment doctrine, the defendant
presumably had exercised some discretion in deciding who should enjoy his
confidential communications. See, e. g., Lopez v. United States, 373 U.S.
427, 439, 83 S.Ct. 1381, 1388, 10 L.Ed.2d 462 (1963); Hoffa v. United
States, 385 U.S. 293, 302–303, 87 S.Ct. 408, 413–414, 17 L.Ed.2d 374
(1966); United States v. White, supra, 401 U.S., at 751–752, 91 S.Ct., at
1125–1126 (plurality opinion). By contrast here, unless a person is prepared
to forgo use of what for many has become a personal or professional
necessity, he cannot help but accept the risk of surveillance. Cf. Lopez v.
United States, supra, 373 U.S., at 465–466, 83 S.Ct., at 1401–1402
(BRENNAN, J., dissenting). It is idle to speak of “assuming” risks in contexts
Lacking the Court's apparently exhaustive knowledge of this Nation's
telephone books and the reading habits of telephone subscribers, see ante,
at 2581–2582, I decline to assume general public awareness of how obscene
phone calls are traced. Nor am I persuaded that the scope of Fourth
Amendment protection should turn on the concededly “esoteric functions” of
pen registers in corporate billing, ante, at 2581, functions with which
subscribers are unlikely to have intimate familiarity.
1
215
where, as a practical matter, individuals have no realistic alternative.
More fundamentally, to make risk analysis dispositive in assessing the
reasonableness of privacy expectations would allow the government to
define the scope of Fourth Amendment protections. For example, law
enforcement officials, simply by announcing their intent to monitor the
content of random samples of first-class mail or private phone
conversations, could put the public on notice of the risks they would
thereafter assume in such communications. See Amsterdam, Perspectives on
the Fourth Amendment, 58 Minn.L.Rev. 349, 384, 407 (1974). Yet, although
acknowledging this implication of its analysis, the Court is willing to concede
only that, in some circumstances, a further “normative inquiry would be
proper.” Ante, at 2580 n. 5. No meaningful effort is made to explain what
those circumstances might be, or why this case is not among them.
In my view, whether privacy expectations are legitimate within the
meaning of Katz depends not on the risks an individual can be presumed to
accept when imparting information to third parties, but on the risks he
should be forced to assume in a free and open society. By its terms, the
constitutional prohibition of unreasonable searches and seizures assigns to
the judiciary some prescriptive responsibility. As Mr. Justice Harlan, who
formulated the standard the Court applies today, himself recognized:
“[s]ince it is the task of the law to form and project, as well as mirror and
reflect, we should not . . . merely recite . . . risks without examining the
desirability of saddling them upon society.” United States v. White, supra,
401 U.S., at 786, 91 S.Ct., at 1143 (dissenting opinion). In making this
*751 assessment, courts must evaluate the “intrinsic character” of
investigative practices with reference to the basic values underlying the
Fourth Amendment. California Bankers Assn. v. Shultz, 416 U.S., at 95, 94
S.Ct., at 1534 (MARSHALL, J., dissenting). And for those “extensive
intrusions that significantly jeopardize [individuals'] sense of security . . . .
more than self-restraint by law enforcement officials is required.” United
States v. White, supra, 401 U.S., at 786, 91 S.Ct., at 1143 (Harlan, J.,
dissenting).
The use of pen registers, I believe, constitutes such an extensive
intrusion. To hold otherwise ignores the vital role telephonic communication
plays in our personal and professional relationships, see Katz v. United
States, 389 U.S., at 352, 88 S.Ct., at 511, as well as the First and Fourth
Amendment interests implicated by unfettered official surveillance. Privacy in
placing calls is of value not only to those engaged in criminal activity. The
prospect of unregulated governmental monitoring will undoubtedly prove
disturbing even to those with nothing illicit to hide. Many individuals,
including members of unpopular political organizations or journalists with
confidential sources, may legitimately wish to avoid disclosure of their
personal contacts. See NAACP v. Alabama, 357 U.S. 449, 463, 78 S.Ct.
1163, 1172, 2 L.Ed.2d 1488 (1958); Branzburg v. Hayes, 408 U.S. 665,
216
695, 92 S.Ct. 2646, 2663, 33 L.Ed.2d 626 (1972); id., at 728–734, 92 S.Ct.,
at 2673–2676 (STEWART, J., dissenting). Permitting governmental access to
telephone records on less than probable cause may thus impede certain
forms of political affiliation and journalistic endeavor that are the hallmark of
a truly free society. Particularly given the Government's previous reliance on
warrantless telephonic surveillance to trace reporters' sources and monitor
protected political activity, I am unwilling to insulate use of pen registers
from independent judicial review.
Just as one who enters a public telephone booth is “entitled to assume
that the words he utters into the mouthpiece will not be broadcast to the
world,” Katz v. United States, supra, 389 U.S., at 352, 88 S.Ct., at 512, so
too, he should be entitled to assume that the numbers he dials in the privacy
of his home will be recorded, if at all, solely for the phone company's
business purposes. Accordingly, I would require law enforcement officials to
obtain a warrant before they enlist telephone companies to secure
information otherwise beyond the government's reach.
Feist Publications, Inc. v. Rural Telephone Service Company, Inc.
499 U.S. 340 (1991)
Justice O'Connor delivered the opinion of the Court.
This case requires us to clarify the extent of copyright protection available to
telephone directory white pages.
I
Rural Telephone Service Company, Inc., is a certified public utility that
provides telephone service to several communities in northwest Kansas. It is
subject to a state regulation that requires all telephone companies operating in
Kansas to issue annually an updated telephone directory. Accordingly, as a
condition of its monopoly franchise, Rural publishes a typical telephone directory,
consisting of white pages and yellow pages. The white pages list in alphabetical
order the names of Rural's subscribers, together with their towns and telephone
numbers. The yellow pages list Rural's business subscribers alphabetically by
category and feature classified advertisements of various sizes. Rural distributes
its directory free of charge to its subscribers, but earns revenue by selling yellow
pages advertisements.
Feist Publications, Inc., is a publishing company that specializes in area- wide
telephone directories. Unlike a typical directory, which covers only a particular
calling area, Feist's area-wide directories cover a much larger geographical range,
reducing the need to call directory assistance or consult multiple directories. The
Feist directory that is the subject of this litigation covers 11 different telephone
service areas in 15 counties and contains 46,878 white pages listings--compared to
217
Rural's approximately 7,700 listings. Like Rural's directory, Feist's is distributed
free of charge and includes both white pages and yellow pages. Feist and Rural
compete vigorously for yellow pages advertising.
As the sole provider of telephone service in its service area, Rural obtains
subscriber information quite easily. Persons desiring telephone service must apply
to Rural and provide their names and addresses; Rural then assigns them a
telephone number. Feist is not a telephone company, let alone one with monopoly
status, and therefore lacks independent access to any subscriber information. To
obtain white pages listings for its area-wide directory, Feist approached each of the
11 telephone companies operating in northwest Kansas and offered to pay for the
right to use its white pages listings.
Of the 11 telephone companies, only Rural refused to license its listings to
Feist. Rural's refusal created a problem for Feist, as omitting these listings would
have left a gaping hole in its area-wide directory, rendering it less attractive to
potential yellow pages advertisers. In a decision subsequent to that which we
review here, the District Court determined that this was precisely the reason Rural
refused to license its listings. The refusal was motivated by an unlawful purpose
"to extend its monopoly in telephone service to a monopoly in yellow pages
advertising." Rural Telephone Service Co. v. Feist Publications, Inc., 737 F.Supp.
610, 622 (Kan.1990).
Unable to license Rural's white pages listings, Feist used them without Rural's
consent. Feist began by removing several thousand listings that fell outside the
geographic range of its area-wide directory, then hired personnel to investigate the
4,935 that remained. These employees verified the data reported by Rural and
sought to obtain additional information. As a result, a typical Feist listing includes
the individual's street address; most of Rural's listings do not. Notwithstanding
these additions, however, 1,309 of the 46,878 listings in Feist's 1983 directory
were identical to listings in Rural's 1982-1983 white pages . . . Four of these were
fictitious listings that Rural had inserted into its directory to detect copying.
Rural sued for copyright infringement in the District Court for the District of
Kansas taking the position that Feist, in compiling its own directory, could not use
the information contained in Rural's white pages. Rural asserted that Feist's
employees were obliged to travel door-to-door or conduct a telephone survey to
discover the same information for themselves. Feist responded that such efforts
were economically impractical and, in any event, unnecessary because the
information copied was beyond the scope of copyright protection. The District Court
granted summary judgment to Rural, explaining that "[c]ourts have consistently
held that telephone directories are copyrightable" and citing a string of lower court
decisions. 663 F.Supp. 214, 218 (1987) . . . We granted certiorari . . . to
determine whether the copyright in Rural's directory protects the names, towns,
and telephone numbers copied by Feist.
II
218
A
This case concerns the interaction of two well-established propositions. The
first is that facts are not copyrightable; the other, that compilations of facts
generally are. Each of these propositions possesses an impeccable pedigree.
That there can be no valid copyright in facts is universally understood. The most
fundamental axiom of copyright law is that "[n]o author may copyright his ideas or
the facts he narrates." Harper & Row, Publishers, Inc. v. Nation Enterprises, 471
U.S. 539, 556 (1985). Rural wisely concedes this point, noting in its brief that
"[f]acts and discoveries, of course, are not themselves subject to copyright
protection." At the same time, however, it is beyond dispute that compilations of
facts are within the subject matter of copyright. Compilations were expressly
mentioned in the Copyright Act of 1909, and again in the Copyright Act of 1976.
There is an undeniable tension between these two propositions. Many
compilations consist of nothing but raw data--i.e., wholly factual information not
accompanied by any original written expression. On what basis may one claim a
copyright in such a work? Common sense tells us that 100 uncopyrightable facts
do not magically change their status when gathered together in one place. Yet
copyright law seems to contemplate that compilations that consist exclusively of
facts are potentially within its scope.
The key to resolving the tension lies in understanding why facts are not
copyrightable. The sine qua non of copyright is originality. To qualify for copyright
protection, a work must be original to the author . . . Original, as the term is used
in copyright, means only that the work was independently created by the author (as
opposed to copied from other works), and that it possesses at least some minimal
degree of creativity. 1 M. Nimmer & D. Nimmer, Copyright § § 2.01[A], [B] (1990)
(hereinafter Nimmer). To be sure, the requisite level of creativity is extremely
low; even a slight amount will suffice. The vast majority of works make the grade
quite easily, as they possess some creative spark, "no matter how crude, humble or
obvious" it might be. Id., § 1.08[C][1]. Originality does not signify novelty; a
work may be original even though it closely resembles other works so long as the
similarity is fortuitous, not the result of copying. To illustrate, assume that two
poets, each ignorant of the other, compose identical poems. Neither work is novel,
yet both are original and, hence, copyrightable . . .
Originality is a constitutional requirement. The source of Congress' power to
enact copyright laws is Article I, § 8, cl. 8, of the Constitution, which authorizes
Congress to "secur[e] for limited Times to Authors ... the exclusive Right to their
respective Writings."
...
It is this bedrock principle of copyright that mandates the law's seemingly
disparate treatment of facts and factual compilations. "No one may claim
originality as to facts." Id., § 2.11[A], p. 2-157. This is because facts do not owe
their origin to an act of authorship. The distinction is one between creation and
discovery: The first person to find and report a particular fact has not created the
219
fact; he or she has merely discovered its existence. . . "The discoverer merely finds
and records." Nimmer § 2.03[E] . . .
Factual compilations, on the other hand, may possess the requisite
originality. The compilation author typically chooses which facts to include, in what
order to place them, and how to arrange the collected data so that they may be
used effectively by readers. These choices as to selection and arrangement, so
long as they are made independently by the compiler and entail a minimal degree
of creativity, are sufficiently original that Congress may protect such compilations
through the copyright laws. Nimmer § § 2.11[D], 3.03; Denicola 523, n. 38.
Thus, even a directory that contains absolutely no protectable written expression,
only facts, meets the constitutional minimum for copyright protection if it features
an original selection or arrangement. . .
This protection is subject to an important limitation. The mere fact that a
work is copyrighted does not mean that every element of the work may be
protected. Originality remains the sine qua non of copyright; accordingly,
copyright protection may extend only to those components of a work that are
original to the author. Ginsburg, Creation and Commercial Value: Copyright
Protection of Works of Information, 90 Colum.L.Rev. 1865, 1868, and n. 12 (1990)
(hereinafter Ginsburg). Thus, if the compilation author clothes facts with an
original collocation of words, he or she may be able to claim a copyright in this
written expression. Others may copy the underlying facts from the publication, but
not the precise words used to present them. In Harper & Row, for example, we
explained that President Ford could not prevent others from copying bare historical
facts from his autobiography, see 471 U.S., at 556-557, but that he could prevent
others from copying his "subjective descriptions and portraits of public figures."
Id., at 563. Where the compilation author adds no written expression but rather
lets the facts speak for themselves, the expressive element is more elusive. The
only conceivable expression is the manner in which the compiler has selected and
arranged the facts. Thus, if the selection and arrangement are original, these
elements of the work are eligible for copyright protection . . . No matter how
original the format, however, the facts themselves do not become original through
association . . .
This inevitably means that the copyright in a factual compilation is thin.
Notwithstanding a valid copyright, a subsequent compiler remains free to use the
facts contained in another's publication to aid in preparing a competing work, so
long as the competing work does not feature the same selection and arrangement.
As one commentator explains it: "[N]o matter how much original authorship the
work displays, the facts and ideas it exposes are free for the taking.... [T]he very
same facts and ideas may be divorced from the context imposed by the author, and
restated or reshuffled by second comers, even if the author was the first to discover
the facts or to propose the ideas." Ginsburg 1868.
It may seem unfair that much of the fruit of the compiler's labor may be used
by others without compensation. As Justice Brennan has correctly observed,
however, this is not "some unforeseen byproduct of a statutory scheme." Harper &
220
Row, 471 U.S., at 589, 105 S.Ct., at 2245 (dissenting opinion). It is, rather, "the
essence of copyright," ibid., and a constitutional requirement. The primary
objective of copyright is not to reward the labor of authors, but "[t]o promote the
Progress of Science and useful Arts." Art. I, § 8, cl. 8 . . . To this end, copyright
assures authors the right to their original expression, but encourages others to
build freely upon the ideas and information conveyed by a work . . . This principle,
known as the idea/expression or fact/expression dichotomy, applies to all works of
authorship. As applied to a factual compilation, assuming the absence of original
written expression, only the compiler's selection and arrangement may be
protected; the raw facts may be copied at will. This result is neither unfair nor
unfortunate. It is the means by which copyright advances the progress of science
and art.
...
This, then, resolves the doctrinal tension: Copyright treats facts and factual
compilations in a wholly consistent manner. Facts, whether alone or as part of a
compilation, are not original and therefore may not be copyrighted. A factual
compilation is eligible for copyright if it features an original selection or
arrangement of facts, but the copyright is limited to the particular selection or
arrangement. In no event may copyright extend to the facts themselves.
B
As we have explained, originality is a constitutionally mandated prerequisite
for copyright protection. The Court's decisions announcing this rule predate the
Copyright Act of 1909, but ambiguous language in the 1909 Act caused some lower
courts temporarily to lose sight of this requirement.
...
. . . these courts developed a new theory to justify the protection of factual
compilations. Known alternatively as "sweat of the brow" or "industrious
collection," the underlying notion was that copyright was a reward for the hard
work that went into compiling facts. The classic formulation of the doctrine
appeared in Jeweler's Circular Publishing Co., 281 F., at 88:
The right to copyright a book upon which one has expended labor in its
preparation does not depend upon whether the materials which he has
collected consist or not of matters which are publici juris, or whether such
materials show literary skill or originality, either in thought or in language, or
anything more than industrious collection. The man who goes through the
streets of a town and puts down the names of each of the inhabitants, with
their occupations and their street number, acquires material of which he is
the author" (emphasis added).
The "sweat of the brow" doctrine had numerous flaws, the most glaring being
that it extended copyright protection in a compilation beyond selection and
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arrangement--the compiler's original contributions--to the facts themselves. Under
the doctrine, the only defense to infringement was independent creation. A
subsequent compiler was "not entitled to take one word of information previously
published," but rather had to "independently wor[k] out the matter for himself, so
as to arrive at the same result from the same common sources of information."
Id., at 88-89 (internal quotation marks omitted). "Sweat of the brow" courts
thereby eschewed the most fundamental axiom of copyright law-- that no one may
copyright facts or ideas . . .
C
"Sweat of the brow" decisions did not escape the attention of the Copyright
Office. When Congress decided to overhaul the copyright statute . . ., the
Copyright Office promptly recommended that Congress clear up the confusion in
the lower courts as to the basic standards of copyrightability. The Register of
Copyrights . . . suggested making the originality requirement explicit.
Congress took the Register's advice. In enacting the Copyright Act of 1976,
Congress dropped the reference to "all the writings of an author" and replaced it
with the phrase "original works of authorship." 17 U.S.C. § 102(a) . . .
. . . Congress enacted two new provisions. First, to make clear that
compilations were not copyrightable per se, Congress provided a definition of the
term "compilation." Second, to make clear that the copyright in a compilation did
not extend to the facts themselves, Congress enacted § 103.
The definition of "compilation" is found in § 101 of the 1976 Act. It defines
a "compilation" in the copyright sense as "a work formed by the collection and
assembling of preexisting materials or of data that are selected, coordinated, or
arranged in such a way that the resulting work as a whole constitutes an original
work of authorship" (emphasis added).
The purpose of the statutory definition is to emphasize that collections of
facts are not copyrightable per se. It conveys this message through its tripartite
structure, as emphasized above by the italics. The statute identifies three distinct
elements and requires each to be met for a work to qualify as a copyrightable
compilation: (1) the collection and assembly of pre-existing material, facts, or
data; (2) the selection, coordination, or arrangement of those materials; and (3)
the creation, by virtue of the particular selection, coordination, or arrangement, of
an "original" work of authorship . . .
...
The key to the statutory definition is the second requirement. It instructs
courts that, in determining whether a fact-based work is an original work of
authorship, they should focus on the manner in which the collected facts have been
selected, coordinated, and arranged. This is a straightforward application of the
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originality requirement. Facts are never original, so the compilation author can
claim originality, if at all, only in the way the facts are presented. To that end, the
statute dictates that the principal focus should be on whether the selection,
coordination, and arrangement are sufficiently original to merit protection.
Not every selection, coordination, or arrangement will pass muster. This is
plain from the statute. It states that, to merit protection, the facts must be
selected, coordinated, or arranged "in such a way" as to render the work as a whole
original. This implies that some "ways" will trigger copyright, but that others will
not . . . we conclude that the statute envisions that there will be some fact-based
works in which the selection, coordination, and arrangement are not sufficiently
original to trigger copyright protection.
As discussed earlier, however, the originality requirement is not particularly
stringent. A compiler may settle upon a selection or arrangement that others have
used; novelty is not required. Originality requires only that the author make the
selection or arrangement independently (i.e., without copying that selection or
arrangement from another work), and that it display some minimal level of
creativity. Presumably, the vast majority of compilations will pass this test, but
not all will. There remains a narrow category of works in which the creative spark
is utterly lacking or so trivial as to be virtually nonexistent . . .
Even if a work qualifies as a copyrightable compilation, it receives only
limited protection. This is the point of § 103 of the Act. Section 103 explains that
"[t]he subject matter of copyright ... includes compilations," § 103(a), but that
copyright protects only the author's original contributions--not the facts or
information conveyed:
The copyright in a compilation ... extends only to the material contributed by
the author of such work, as distinguished from the preexisting material
employed in the work, and does not imply any exclusive right in the
preexisting material." §103(b).
As § 103 makes clear, copyright is not a tool by which a compilation author may
keep others from using the facts or data he or she has collected . . . Rather, the
facts contained in existing works may be freely copied because copyright protects
only the elements that owe their origin to the compiler--the selection, coordination,
and arrangement of facts.
...
III
There is no doubt that Feist took from the white pages of Rural's directory a
substantial amount of factual information. At a minimum, Feist copied the names,
towns, and telephone numbers of 1,309 of Rural's subscribers. Not all copying,
however, is copyright infringement. To establish infringement, two elements must
be proven: (1) ownership of a valid copyright, and (2) copying of constituent
223
elements of the work that are original . . . The first element is not at issue here;
Feist appears to concede that Rural's directory, considered as a whole, is subject to
a valid copyright because it contains some foreword text, as well as original
material in its yellow pages advertisements.
The question is whether Rural has proved the second element. In other
words, did Feist, by taking 1,309 names, towns, and telephone numbers from
Rural's white pages, copy anything that was "original" to Rural? Certainly, the raw
data does not satisfy the originality requirement. Rural may have been the first to
discover and report the names, towns, and telephone numbers of its subscribers,
but . . . these bits of information are uncopyrightable facts; they existed before
Rural reported them and would have continued to exist if Rural had never published
a telephone directory . . .
Rural essentially concedes the point by referring to the names, towns, and
telephone numbers as "preexisting material." . . . Section 103(b) states explicitly
that the copyright in a compilation does not extend to "the preexisting material
employed in the work."
The question that remains is whether Rural selected, coordinated, or
arranged these uncopyrightable facts in an original way. As mentioned, originality
is not a stringent standard; it does not require that facts be presented in an
innovative or surprising way. It is equally true, however, that the selection and
arrangement of facts cannot be so mechanical or routine as to require no creativity
whatsoever . . .
The selection, coordination, and arrangement of Rural's white pages do not
satisfy the minimum constitutional standards for copyright protection. As
mentioned at the outset, Rural's white pages are entirely typical. Persons desiring
telephone service in Rural's service area fill out an application and Rural issues
them a telephone number. In preparing its white pages, Rural simply takes the
data provided by its subscribers and lists it alphabetically by surname. The end
product is a garden-variety white pages directory, devoid of even the slightest trace
of creativity.
Rural's selection of listings could not be more obvious: It publishes the most
basic information--name, town, and telephone number--about each person who
applies to it for telephone service. This is "selection" of a sort, but it lacks the
modicum of creativity necessary to transform mere selection into copyrightable
expression. Rural expended sufficient effort to make the white pages directory
useful, but insufficient creativity to make it original.
...
Nor can Rural claim originality in its coordination and arrangement of facts.
The white pages do nothing more than list Rural's subscribers in alphabetical order.
This arrangement may, technically speaking, owe its origin to Rural; no one
disputes that Rural undertook the task of alphabetizing the names itself. But there
224
is nothing remotely creative about arranging names alphabetically in a white pages
directory. It is an age-old practice, firmly rooted in tradition and so commonplace
that it has come to be expected as a matter of course . . . It is not only unoriginal,
it is practically inevitable. This time-honored tradition does not possess the
minimal creative spark required by the Copyright Act and the Constitution.
We conclude that the names, towns, and telephone numbers copied by Feist
were not original to Rural and therefore were not protected by the copyright in
Rural's combined white and yellow pages directory. As a constitutional matter,
copyright protects only those constituent elements of a work that possess more
than a de minimis quantum of creativity. Rural's white pages, limited to basic
subscriber information and arranged alphabetically, fall short of the mark . . . Given
that some works must fail, we cannot imagine a more likely candidate. Indeed,
were we to hold that Rural's white pages pass muster, it is hard to believe that any
collection of facts could fail.
Because Rural's white pages lack the requisite originality, Feist's use of the
listings cannot constitute infringement. This decision should not be construed as
demeaning Rural's efforts in compiling its directory, but rather as making clear that
copyright rewards originality, not effort . . .
The judgment of the Court of Appeals is
Reversed.
Princeton University Press v. Michigan Document Services, Inc.
99 F.3d 1381 (6th Cir. 1996)
David A. Nelson, Circuit Judge.
This is a copyright infringement case. The corporate defendant, Michigan
Document Services, Inc., is a commercial copyshop that reproduced substantial
segments of copyrighted works of scholarship, bound the copies into “coursepacks,”
and sold the coursepacks to students for use in fulfilling reading assignments given
by professors at the University of Michigan. The copyshop acted without permission
from the copyright holders, and the main question presented is whether the “fair
use” doctrine codified at 17 U.S.C. § 107 obviated the need to obtain such
permission.
Answering this question “no,” and finding the infringement willful, the district
court entered a summary judgment order in which the copyright holders were
granted equitable relief and were awarded damages that may have been enhanced
for willfulness. Princeton Univ. Press v. Michigan Document Servs., Inc., 855
F.Supp. 905 (E.D.Mich.1994). A three-judge panel of this court reversed the
judgment on appeal, but a majority of the active judges of the court subsequently
225
voted to rehear the case en banc. The appeal has now been argued before the full
court.
We agree with the district court that the defendants' commercial exploitation
of the copyrighted materials did not constitute fair use, and we shall affirm that
branch of the district court's judgment. We believe that the district court erred in its
finding of willfulness, however, and we shall vacate the damages award because of
its possible linkage to that finding.
Thanks to relatively recent advances in technology, the coursepack-an
artifact largely unknown to college students when the author of this opinion was an
undergraduate-has become almost as ubiquitous at American colleges and
universities as the conventional textbook. From the standpoint of the professor
responsible for developing and teaching a particular course, the availability of
coursepacks has an obvious advantage; by selecting readings from a variety of
sources, the professor can create what amounts to an anthology perfectly tailored
to the course the professor wants to present.
The physical production of coursepacks is typically handled by a commercial
copyshop. The professor gives the copyshop the materials of which the coursepack
is to be made up, and the copyshop does the rest. Adding a cover page and a table
of contents, perhaps, the copyshop runs off as many sets as are needed, does the
necessary binding, and sells the finished product to the professor's students.
Ann Arbor, the home of the University of Michigan, is also home to several
copyshops. Among them is defendant Michigan Document Services (MDS), a
corporation owned by defendant James Smith. We are told that MDS differs from
most, if not all, of its competitors in at least one important way: it does not request
permission from, nor does it pay agreed royalties to, copyright owners.
Mr. Smith has been something of a crusader against the system under which
his competitors have been paying agreed royalties, or “permission fees” as they are
known in the trade. The story begins in March of 1991, when Judge Constance
Baker Motley, of the United States District Court for the Southern District of New
York, decided the first reported case involving the copyright implications of
educational coursepacks. See Basic Books, Inc. v. Kinko's Graphics Corp., 758
F.Supp. 1522 (S.D.N.Y.1991), holding that a Kinko's copyshop had violated the
copyright statute by creating and selling coursepacks without permission from the
publishing houses that held the copyrights. After Kinko's, we are told, many
copyshops that had not previously requested permission from copyright holders
began to obtain such permission. Mr. Smith chose not to do so. He consulted an
attorney, and the attorney apparently advised him that while it was “risky” not to
obtain permission, there were flaws in the Kinko's decision. Mr. Smith also
undertook his own study of the fair use doctrine, reading what he could find on this
subject in a law library. He ultimately concluded that the Kinko's case had been
wrongly decided, and he publicized this conclusion through speeches, writings, and
advertisements. His advertisements stressed that professors whose students
226
purchased his coursepacks would not have to worry about delays attendant upon
obtaining permission from publishers.
Not surprisingly, Mr. Smith attracted the attention of the publishing industry.
Three publishers-Princeton University Press, MacMillan, Inc., and St. Martin's Press,
Inc.-eventually brought the present suit against Mr. Smith and his corporation.
Each of the plaintiff publishers maintains a department that processes
requests for permission to reproduce portions of copyrighted works. (In addition,
copyshops may request such permission through the Copyright Clearance Center, a
national clearinghouse.) Macmillan and St. Martin's, both of which are for-profit
companies, claim that they generally respond within two weeks to requests for
permission to make copies for classroom use. Princeton, a non-profit organization,
claims to respond within two to four weeks. Mr. Smith has not put these claims to
the test, and he has not paid permission fees.
The plaintiffs allege infringement of the copyrights on six different works that
were excerpted without permission. The works in question, and the statistics on the
magnitude of the excerpts, are as follows: Nancy J. Weiss, Farewell to the Party of
Lincoln: Black Politics in the Age of FDR (95 pages copied, representing 30 percent
of the entire book); Walter Lippmann, Public Opinion (45 pages copied,
representing 18 percent of the whole); Robert E. Layne, Political Ideology: Why the
American Common Man Believes What He Does (78 pages, 16 percent); Roger
Brown, Social Psychology (52 pages, 8 percent); Milton Rokeach, The Nature of
Human Values (77 pages, 18 percent); James S. Olson and Randy Roberts, Where
the Domino Fell, America and Vietnam, 1945-1950 (17 pages, 5 percent). The
extent of the copying is undisputed, and the questions presented by the case
appear to be purely legal in nature.
II
The fair use doctrine, which creates an exception to the copyright monopoly,
“permits [and requires] courts to avoid rigid application of the copyright statute
when, on occasion, it would stifle the very creativity which that law is designed to
foster.” Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577, 114 S.Ct. 1164,
1170, 127 L.Ed.2d 500 (1994), quoting Stewart v. Abend, 495 U.S. 207, 236, 110
S.Ct. 1750, 1768, 109 L.Ed.2d 184 (1990). Initially developed by the courts, the
doctrine was codified at 17 U.S.C. § 107 in 1976. Congress used the following
formulation in Section 107:
“[T]he fair use of a copyrighted work, including such use by reproduction in copies
... for purposes such as criticism, comment, news reporting, teaching (including
multiple copies for classroom use), scholarship, or research, is not an infringement
of copyright. In determining whether the use made of a work in any particular case
is a fair use the factors to be considered shall include(1) the purpose and character of the use, including whether such use is of a
commercial nature or is for nonprofit educational purposes;
227
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted
work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted
work....”
This language does not provide blanket immunity for “multiple copies for classroom
use.” Rather, “whether a use referred to in the first sentence of Section 107 is a fair
use in a particular case ... depend[s] upon the application of the determinative
factors.” Campbell, 510 U.S. at 578 n. 9, 114 S.Ct. at 1170 n. 9, quoting S.Rep.
No. 94-473, p. 62.
The four statutory factors may not have been created equal. In determining
whether a use is “fair,” the Supreme Court has said that the most important factor
is the fourth, the one contained in 17 U.S.C. § 107(4). See Harper & Row
Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566, 105 S.Ct. 2218, 2233, 85
L.Ed.2d 588 (1985), citing 3 M. Nimmer, Copyright § 13.05[A], at 13-76 (1984).
(But see American Geophysical Union v. Texaco Inc., 60 F.3d 913, 926 (2d
Cir.1994), cert. dismissed, 516 U.S. 1005, 116 S.Ct. 592, 133 L.Ed.2d 486 (1995),
suggesting that the Supreme Court may now have abandoned the idea that the
fourth factor is of paramount importance.) We take it that this factor, “the effect of
the use upon the potential market for or value of the copyrighted work,” is at least
primus inter pares, figuratively speaking, and we shall turn to it first.
The burden of proof as to market effect rests with the copyright holder if the
challenged use is of a “noncommercial” nature. The alleged infringer has the
burden, on the other hand, if the challenged use is “commercial” in nature. Sony
Corp. v. Universal City Studios, Inc., 464 U.S. 417, 451, 104 S.Ct. 774, 793, 78
L.Ed.2d 574 (1984). In the case at bar the defendants argue that the burden of
proof rests with the publishers because the use being challenged is
“noncommercial.” We disagree.
It is true that the use to which the materials are put by the students who
purchase the coursepacks is noncommercial in nature. But the use of the materials
by the students is not the use that the publishers are challenging. What the
publishers are challenging is the duplication of copyrighted materials for sale by a
for-profit corporation that has decided to maximize its profits-and give itself a
competitive edge over other copyshops-by declining to pay the royalties requested
by the holders of the copyrights.
The defendants' use of excerpts from the books at issue here was no less
commercial in character than was The Nation magazine's use of copyrighted
material in Harper & Row, where publication of a short article containing excerpts
from the still unpublished manuscript of a book by President Ford was held to be an
unfair use. Like the students who purchased unauthorized coursepacks, the
228
purchasers of The Nation did not put the contents of the magazine to commercial
use-but that did not stop the Supreme Court from characterizing the defendant's
use of the excerpts as “a publication [that] was commercial as opposed to
nonprofit....” Harper & Row, 471 U.S. at 562, 105 S.Ct. at 2231. And like the use
that is being challenged in the case now before us, the use challenged in Harper &
Row was “presumptively an unfair exploitation of the monopoly privilege that
belongs to the owner of the copyright.” Id., quoting Sony, 464 U.S. at 451, 104
S.Ct. at 793
The strength of the Sony presumption may vary according to the context in
which it arises, and the presumption disappears entirely where the challenged use
is one that transforms the original work into a new artistic creation. See Campbell,
510 U.S. at 587-89, 114 S.Ct. at 1176. Perhaps the presumption is weaker in the
present case than it would be in other contexts. There is a presumption of
unfairness here, nonetheless, and we are not persuaded that the defendants have
rebutted it.
If we are wrong about the existence of the presumption-if the challenged use
is not commercial, in other words, and if the plaintiff publishers have the burden of
proving an adverse effect upon either the potential market for the copyrighted work
or the potential value of the work-we believe that the publishers have carried the
burden of proving a diminution in potential market value.
One test for determining market harm [is this:] “[T]o negate fair use,” the
Supreme Court has said, “one need only show that if the challenged use ‘should
become widespread, it would adversely affect the potential market for the
copyrighted work.’ ” Harper & Row, 471 U.S. at 568, 105 S.Ct. at 2234, quoting
Sony, 464 U.S. at 451, 104 S.Ct. at 793 (emphasis supplied in part). Under this
test, we believe, it is reasonably clear that the plaintiff publishers have succeeded
in negating fair use.
As noted above, most of the copyshops that compete with MDS in the sale of
coursepacks pay permission fees for the privilege of duplicating and selling excerpts
from copyrighted works. The three plaintiffs together have been collecting
permission fees at a rate approaching $500,000 a year. If copyshops across the
nation were to start doing what the defendants have been doing here, this revenue
stream would shrivel and the potential value of the copyrighted works of
scholarship published by the plaintiffs would be diminished accordingly.
The defendants contend that it is circular to assume that a copyright holder is
entitled to permission fees and then to measure market loss by reference to the
lost fees. They argue that market harm can only be measured by lost sales of
books, not permission fees. But the circularity argument proves too much. Imagine
that the defendants set up a printing press and made exact reproductions-asserting
that such reproductions constituted “fair use”-of a book to which they did not hold
the copyright. Under the defendants' logic it would be circular for the copyright
holder to argue market harm because of lost copyright revenues, since this would
assume that the copyright holder had a right to such revenues.
229
A “circularity” argument indistinguishable from that made by the defendants
here was rejected by the Second Circuit in American Geophysical, 60 F.3d at 92931 (Jon O. Newman, C.J.), where the photocopying of scientific articles for use by
Texaco researchers was held to be an unfair use. It is true, the Second Circuit
acknowledged, that “a copyright holder can always assert some degree of adverse
[e]ffect on its potential licensing revenues as a consequence of [the defendant's
use] ... simply because the copyright holder has not been paid a fee to permit that
particular use.” Id. at 929 n. 17. But such an assertion will not carry much weight if
the defendant has “filled a market niche that the [copyright owner] simply had no
interest in occupying.” Id. at 930 (quoting Twin Peaks Prods., Inc. v. Publications
Int'l, Ltd., 996 F.2d 1366, 1377 (2d Cir.1993)). Where, on the other hand, the
copyright holder clearly does have an interest in exploiting a licensing market-and
especially where the copyright holder has actually succeeded in doing so-“it is
appropriate that potential licensing revenues for photocopying be considered in a
fair use analysis.” American Geophysical, 60 F.3d at 930. Only “traditional,
reasonable, or likely to be developed markets” are to be considered in this
connection, and even the availability of an existing system for collecting licensing
fees will not be conclusive. Id. at 930-31. But Congress has implicitly suggested
that licensing fees should be recognized in appropriate cases as part of the potential
market for or value of the copyrighted work, and it was primarily because of lost
licensing revenue that the Second Circuit agreed with the finding of the district
court in American Geophysical that “the publishers have demonstrated a substantial
harm to the value of their copyrights through [Texaco's] copying.” Id. at 931
(quoting the district court opinion (Pierre N. Leval, J.) reported at 802 F.Supp. 1, 21
(S.D.N.Y.1992)).
The approach followed by Judges Newman and Leval in the American
Geophysical litigation is fully consistent with the Supreme Court case law. In Harper
& Row, where there is no indication in the opinion that the challenged use caused
any diminution in sales of President Ford's memoirs, the Court found harm to the
market for the licensing of excerpts. The Court's reasoning-which was obviously
premised on the assumption that the copyright holder was entitled to licensing fees
for use of its copyrighted materials-is no more circular than that employed here.
And in Campbell, where the Court was unwilling to conclude that the plaintiff had
lost licensing revenues under the fourth statutory factor, the Court reasoned that a
market for critical parody was not one “that creators of original works would in
general develop or license others to develop.” Campbell, 510 U.S. at 592, 114 S.Ct.
at 1178.
The potential uses of the copyrighted works at issue in the case before us
clearly include the selling of permission to reproduce portions of the works for
inclusion in coursepacks-and the likelihood that publishers actually will license such
reproduction is a demonstrated fact. A licensing market already exists here, as it
did not in a case on which the plaintiffs rely, Williams & Wilkins Co. v. United
States, 203 Ct.Cl. 74, 487 F.2d 1345 (1973), aff'd by an equally divided Court, 420
U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975). Thus there is no circularity in
saying, as we do say, that the potential for destruction of this market by
230
widespread circumvention of the plaintiffs' permission fee system is enough, under
the Harper & Row test, “to negate fair use.”
Our final point with regard to the fourth statutory factor concerns the
affidavits of the three professors who assigned one or more of the copyrighted
works to be read by their students. The defendants make much of the proposition
that these professors only assigned excerpts when they would not have required
their students to purchase the entire work. But what seems significant to us is that
none of these affidavits shows that the professor executing the affidavit would have
refrained from assigning the copyrighted work if the position taken by the copyright
holder had been sustained beforehand.
It is true that Professor Victor Lieberman, who assigned the excerpt from the
Olson and Roberts book on America and Vietnam, raises questions about the
workability of the permission systems of “many publishers.” In 1991, Professor
Lieberman avers, a Kinko's copyshop to which he had given materials for inclusion
in a coursepack experienced serious delays in obtaining permissions from unnamed
publishers. Professor Lieberman does not say that timely permission could not have
been obtained from the publisher of the Olson and Roberts book, however, and he
does not say that he would have refrained from assigning the work if the copyshop
had been required to pay a permission fee for it.
It is also true that the publisher of one of the copyrighted works in question
here (Public Opinion, by Walter Lippmann) would have turned down a request for
permission to copy the 45-page excerpt included in a coursepack prepared to the
specifications of Professor Donald Kinder. The excerpt was so large that the
publisher would have preferred that students buy the book itself, and the work was
available in an inexpensive paperback edition. But Professor Kinder does not say
that he would have refrained from assigning the excerpt from the Lippmann book if
it could not have been included in the coursepack. Neither does he say that he
would have refrained from assigning any of the other works mentioned in his
affidavit had he known that the defendants would be required to pay permission
fees for them.
The third professor, Michael Dawson, assigned a 95-page excerpt from the
book on black politics by Nancy Weiss. Professor Dawson does not say that a
license was not available from the publisher of the Weiss book, and he does not say
that the license fee would have deterred him from assigning the book.
III
In the context of nontransformative uses, at least, and except insofar as they
touch on the fourth factor, the other statutory factors seem considerably less
important. We shall deal with them relatively briefly.
A
231
As to “the purpose and character of the use, including whether such use is of
a commercial nature or is for nonprofit educational purposes,” 17 U.S.C. § 107(1),
we have already explained our reasons for concluding that the challenged use is of
a commercial nature.
The defendants argue that the copying at issue here would be considered
“nonprofit educational” if done by the students or professors themselves. The
defendants also note that they can profitably produce multiple copies for less than
it would cost the professors or the students to make the same number of copies.
Most of the copyshops with which the defendants compete have been paying
permission fees, however, and we assume that these shops too can perform the
copying on a more cost-effective basis than the professors or students can. This
strikes us as a more significant datum than the ability of a black market copyshop
to beat the do-it-yourself cost.
As to the proposition that it would be fair use for the students or professors
to make their own copies, the issue is by no means free from doubt. We need not
decide this question, however, for the fact is that the copying complained of here
was performed on a profit-making basis by a commercial enterprise. And “[t]he
courts have ... properly rejected attempts by for-profit users to stand in the shoes
of their customers making nonprofit or noncommercial uses.” Patry, Fair Use in
Copyright Law, at 420 n. 34. As the House Judiciary Committee stated in its report
on the 1976 legislation,
“[I]t would not be possible for a non-profit institution, by means of contractual
arrangements with a commercial copying enterprise, to authorize the enterprise
to carry out copying and distribution functions that would be exempt if conducted
by the non-profit institution itself.” H.R.Rep. No. 1476, 94th Cong., 2d Sess. at 74
(1976), U.S.Code Cong. & Admin.News 5659, 5687-88.
It should be noted, finally, that the degree to which the challenged use has
transformed the original copyrighted works-another element in the first statutory
factor-is virtually indiscernible. If you make verbatim copies of 95 pages of a 316page book, you have not transformed the 95 pages very much-even if you
juxtapose them to excerpts from other works and package everything conveniently.
This kind of mechanical “transformation” bears little resemblance to the creative
metamorphosis accomplished by the parodists in the Campbell case.
B
The second statutory factor, “the nature of the copyrighted work,” is not in
dispute here. The defendants acknowledge that the excerpts copied for the
coursepacks contained creative material, or “expression;” it was certainly not
telephone book listings that the defendants were reproducing. This factor too cuts
against a finding of fair use.
C
232
The third statutory factor requires us to assess “the amount and
substantiality of the portion used in relation to the copyrighted work as a whole.”
Generally speaking, at least, “the larger the volume (or the greater the importance)
of what is taken, the greater the affront to the interests of the copyright owner, and
the less likely that a taking will qualify as a fair use.” Pierre N. Leval, Toward a Fair
Use Standard, 103 HARV. L. REV. 1105, 1122 (1990).
The amounts used in the case at bar-8,000 words in the shortest excerpt-far
exceed the 1,000-word safe harbor that we shall discuss in the next part of this
opinion. See H.R.Rep. No. 1476, 94th Cong., 2d Sess. (1976), reprinted after 17
U.S.C.A. § 107. The defendants were using as much as 30 percent of one
copyrighted work, and in no case did they use less than 5 percent of the
copyrighted work as a whole. These percentages are not insubstantial. And to the
extent that the third factor requires some type of assessment of the “value” of the
excerpted material in relation to the entire work, the fact that the professors
thought the excerpts sufficiently important to make them required reading strikes
us as fairly convincing “evidence of the qualitative value of the copied material.”
Harper & Row, 471 U.S. at 565, 105 S.Ct. at 2233. We have no reason to suppose
that in choosing the excerpts to be copied, the professors passed over material that
was more representative of the major ideas of the work as a whole in preference to
material that was less representative.
The third factor may have more significance for the 95-page excerpt from the
black politics book than for the 17-page excerpt from the Vietnam book. In each
instance, however, the defendants have failed to carry their burden of proof with
respect to “amount and substantiality.”
IV
We turn now to the pertinent legislative history. The general revision of the
copyright law enacted in 1976 was developed through a somewhat unusual process.
Congress and the Register of Copyrights initiated and supervised negotiations
among interested groups-groups that included authors, publishers, and educatorsover specific legislative language. Most of the language that emerged was enacted
into law or was made a part of the committee reports. See Jessica Litman,
Copyright, Compromise, and Legislative History, 72 CORNELL L. R EV. 857 (1987).
The statutory fair use provisions are a direct result of this process. Id. at 876-77.
So too is the “Agreement on Guidelines for Classroom Copying in Not-for-Profit
Educational Institutions With Respect to Books and Periodicals”-commonly called
the “Classroom Guidelines”-set out in H.R.Rep. No. 1476 at 68-71, 94th Cong., 2d
Sess. (1976). The House and Senate conferees explicitly accepted the Classroom
Guidelines “as part of their understanding of fair use,” H.R. Conf. Rep. No. 1733,
94th Cong.2d Sess. at 70 (1976), and the Second Circuit has characterized the
guidelines as “persuasive authority....” American Geophysical, 60 F.3d at 919 n. 5,
citing Kinko's, 758 F.Supp. at 1522-36.
There are strong reasons to consider this legislative history. The statutory
factors are not models of clarity, and the fair use issue has long been a particularly
233
troublesome one. See Acuff-Rose Music, Inc. v. Campbell, 972 F.2d 1429, 1439
(6th Cir.1992) (Nelson, J., dissenting), rev'd, 510 U.S. 569, 114 S.Ct. 1164, 127
L.Ed.2d 500 (1994). Not surprisingly, courts have often turned to the legislative
history when considering fair use questions. See Harper & Row, 471 U.S. at 54953, 105 S.Ct. at 2225-27, where the Supreme Court looked not only to the House
report cited above, but to an earlier Senate report “discussing fair use of
photocopied materials in the classroom....” And see Campbell, 510 U.S. at 574-78,
114 S.Ct. at 1170, where the Court likewise sifted through the congressional
committee reports.
Although the Classroom Guidelines purport to “state the minimum and not
the maximum standards of educational fair use,” they do evoke a general idea, at
least, of the type of educational copying Congress had in mind. The guidelines allow
multiple copies for classroom use provided that (1) the copying meets the test of
brevity (1,000 words, in the present context); (2) the copying meets the test of
spontaneity, under which “[t]he inspiration and decision to use the work and the
moment of its use for maximum teaching effectiveness [must be] so close in time
that it would be unreasonable to expect a timely reply to a request for permission;”
(3) no more than nine instances of multiple copying take place during a term, and
only a limited number of copies are made from the works of any one author or from
any one collective work; (4) each copy contains a notice of copyright; (5) the
copying does not substitute for the purchase of “books, publishers' reprints or
periodicals;” and (6) the student is not charged any more than the actual cost of
copying. The Classroom Guidelines also make clear that unauthorized copying to
create “anthologies, compilations or collective works” is prohibited. H.R.Rep. No.
1476 at 69.
In its systematic and premeditated character, its magnitude, its anthological
content, and its commercial motivation, the copying done by MDS goes well beyond
anything envisioned by the Congress that chose to incorporate the guidelines in the
legislative history. Although the guidelines do not purport to be a complete and
definitive statement of fair use law for educational copying, and although they do
not have the force of law, they do provide us general guidance. The fact that the
MDS copying is light years away from the safe harbor of the guidelines weighs
against a finding of fair use.
Although the Congress that passed the Copyright Act in 1976 would pretty
clearly have thought it unfair for a commercial copyshop to appropriate as much as
30 percent of a copyrighted work without paying the license fee demanded by the
copyright holder, the changes in technology and teaching practices that have
occurred over the last two decades might conceivably make Congress more
sympathetic to the defendants' position today. If the law on this point is to be
changed, however, we think the change should be made by Congress and not by
the courts.
V
234
We take as our text for the concluding part of this discussion of fair use
Justice Stewart's well-known exposition of the correct approach to “ambiguities”
(see Sony, 464 U.S. at 431-32, 104 S.Ct. at 783-84) in the copyright law:
“The immediate effect of our copyright law is to secure a fair return for an ‘author's'
creative labor. But the ultimate aim is, by this incentive, to stimulate artistic
creativity for the general public good. ‘The sole interest of the United States and
the primary object in conferring the monopoly,’ this Court has said, ‘lie in the
general benefits derived by the public from the labors of authors.’ ... When
technological change has rendered its literal terms ambiguous, the Copyright Act
must be construed in light of this basic purpose.” Twentieth Century Music Corp.
v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2044, 45 L.Ed.2d 84 (1975)
(footnotes and citations omitted).
The defendants attach considerable weight to the assertions of numerous academic
authors that they do not write primarily for money and that they want their
published writings to be freely copyable. The defendants suggest that unlicensed
copying will “stimulate artistic creativity for the general public good.”
This suggestion would be more persuasive if the record did not demonstrate
that licensing income is significant to the publishers. It is the publishers who hold
the copyrights, of course-and the publishers obviously need economic incentives to
publish scholarly works, even if the scholars do not need direct economic incentives
to write such works.
The writings of most academic authors, it seems fair to say, lack the general
appeal of works by a Walter Lippmann, for example. (Lippmann is the only nonacademic author whose writings are involved in this case.) One suspects that the
profitability of at least some of the other books at issue here is marginal. If
publishers cannot look forward to receiving permission fees, why should they
continue publishing marginally profitable books at all? And how will artistic
creativity be stimulated if the diminution of economic incentives for publishers to
publish academic works means that fewer academic works will be published?
The fact that a liberal photocopying policy may be favored by many
academics who are not themselves in the publishing business has little relevance in
this connection. As Judge Leval observed in American Geophysical,
“It is not surprising that authors favor liberal photocopying; generally such
authors have a far greater interest in the wide dissemination of their work than in
royalties-all the more so when they have assigned their royalties to the publisher.
But the authors have not risked their capital to achieve dissemination. The
publishers have. Once an author has assigned her copyright, her approval or
disapproval of photocopying is of no further relevance.” 802 F.Supp. at 27.
In the case at bar the district court was not persuaded that the creation of new
works of scholarship would be stimulated by depriving publishers of the revenue
stream derived from the sale of permissions. Neither are we. On the contrary, it
235
seems to us, the destruction of this revenue stream can only have a deleterious
effect upon the incentive to publish academic writings.
...
VIII
The grant of summary judgment on the fair use issue is AFFIRMED. The award of
damages is VACATED, and the case is REMANDED for reconsideration of damages
and for entry of a separate judgment not inconsistent with this opinion.
Jay Robert NASH v. CBS, INC., et al.
899 F.2d 1537, 1990 (7th Cir. 1990)
Easterbrook, Circuit Judge.
John Dillinger, Public Enemy No. 1, died on July 22, 1934, at the Biograph
Theater in Chicago. He emerged from the air conditioned movie palace into a
swetering evening accompanied by two women, one wearing a bright red dress.
The “lady in red”, Anna Sage, had agreed to betray his presence for $10,000.
Agents of the FBI were waiting. Alerted by Polly Hamilton, the other woman, Dilliger
wheeled to fire, but it was too late. A hail of bullets cut him down, his .45 automatic
unused. William C. Sullivan, The Bureau 30-33 (1979). Now a national historic site,
the Biograph bears a plaque commemorating the event. It still shows movies, and
the air conditioning is no better now than in 1934.
Jay Robert Nash believes that Dillinger did not die at the Biograph. In
Dillinger: Dead or Alive? (1970), and The Dillinger Dossier (1983), Nash maintains
that Dillinger learned about the trap and dispatched Jimmy Lawrence, a small-time
hoodlum who looked like him, in his stead. The FBI, mortified that its set-up had no
sting, kept the switch quiet. Nash points to discrepancies between Dillinger's
physical characteristics and those of the corpse: Dillinger had a scar on his upper lip
and the corpse did not; Dillinger lacked a tooth that the corpse possessed; Dillinger
had blue eyes, the corpse brown eyes; Dillinger's eyebrows were thicker than those
of the corpse. Although Dillinger's sister identified the dead man, Nash finds the
circumstances suspicious, and he is struck by the decision of Dillinger's father to
encase the corpse in concrete before burial. As part of the cover-up, according to
Nash, the FBI planted Dillinger's fingerprints in the morgue. After interviewing
many persons connected with Dillinger's gang and the FBI's pursuit of it, Nash
tracked Dillinger to the west coast, where Dillinger married and lay low. Nash
believes that he survived at least until 1979. The Dillinger Dossier contains pictures
of a middle-aged couple and then an elderly man who, Nash believes, is Dillinger in
dotage. Nash provides capsule versions of his conclusions in his Bloodletters and
Badmen: A Narrative Encyclopedia of American Criminals from the Pilgrims to the
Present (1973), and his exposé Citizen Hoover (1972).
236
Nash's reconstruction of the Dillinger story has not won adherents among
historians-or the FBI. Someone in Hollywood must have read The Dillinger Dossier,
however, because in 1984 CBS broadcast an episode of its Simon and Simon series
entitled The Dillinger Print. Simon and Simon featured brothers Rick and A.J.
Simon, private detectives in San Diego. The district court summarized the episode,
704 F.Supp. 823, 828-29 (N.D.Ill.1989):
The opening scene of The [Dillinger] Print shows Ty Becker, a retired FBI agent,
telling his grandchildren about Dillinger's life and the shooting outside the
Biograph Theater on July 22, 1934. Ty also mentions that he doubts Dillinger was
the man who was shot that night and vows to track him down some day. After the
grandchildren leave with his daughter Addie, an intruder breaks into Ty's home,
steals an old gun which once belonged to Dillinger, and kills Ty with the gun.
Concerned that the police would regard Ty's death as a typical murder incident to
burglary rather than related to moonlighting she suspected he was performing for
the FBI, Addie hires the Simons. Next, Addie goes to the bank to remove her
father's safety deposit box. While she is in the vault, a masked man, wearing
1930s-style spectator shoes, shoots tear gas into the bank and steals Ty's safety
deposit box. The Simons arrive at the bank soon thereafter and pick up the thief's
gun, which turns out to be the Dillinger gun stolen from Ty's house. Police
investigation later reveals that the gun bears the fresh fingerprint of John
Dillinger.
The Simons are next seen purchasing newspapers which are carrying the story
that Dillinger may be alive. As the Simons discuss the case, A.J. reads from a
book entitled “Twentieth Century Desperadoes.” He implies that some evidence
supports the idea Dillinger is alive and relates to Rick several physical
discrepancies between Dillinger and the corpse described in the 1934 autopsy.
Nash cites the same discrepancies in his books.
Numerous Dillinger impostors soon come forward, and the FBI enters the case.
However, FBI Agent Kinneman, who is a friend of A.J.'s, informs the Simons that
Ty Becker was not working for the FBI at the time of his death.
The scene then switches to a health club. As A.J. and Kinneman are playing
racquetball, a man wearing a trench coat and spectator shoes enters the club and,
from the viewing area, sprays a salvo of bullets over A.J. and Kinneman.
Afterwards, A.J. solemnly swears revenge against Dillinger or whoever tried to
shoot him.
The next day, the Simons visit the police station and discover that “leads”
regarding Dillinger's whereabouts have poured in from all over the world. They
agree to check out a few leads, including one that takes them to a dentist in San
Diego. The dentist rejects the Simons' suggestion that Dillinger lives in his house
and attributes the police tip to a crazy woman who lives across the street.
The Simons and Addie then pay a visit to Ty Becker's old secretary, who informs
237
them that Ty was working on an internal FBI investigation at the time he was
killed. Immediately thereafter, the Simons and Addie receive a call from
Kinneman, who tells them that “there is more truth to this” Dillinger affair than
anyone had imagined and that the Simons should meet him at a closed-down
theater.
When the Simons and Addie enter the theater, a gangster documentary is playing.
Kinneman and a man wearing spectator shoes shoot at the trio. The Simons
eventually kill the man in spectator shoes. They then subdue Kinneman, who
admits to killing Ty Becker in order to stop the internal investigation which, it
turns out, was directed at Kinneman, and to leaving the fake Dillinger fingerprint
on the gun at the bank.
In the penultimate scene, the FBI thanks the Simons for their help in arresting
Kinneman and solving the Dillinger mystery. Rick nevertheless insists Dillinger
may be alive and perhaps living in Oregon.... The episode closes with a teaser:
the dentist, one of the leads whom the Simons had interviewed earlier in the
program, is seen pushing his elderly father in a wheelchair and admonishing him
to refrain from discussing the “old days in Chicago” anymore.
Nash filed this suit seeking damages on the theory that The Dillinger Print violates
his copyrights in the four books setting out his version of Dillinger's escape from
death and new life on the west coast. The district court determined that the books'
copyrighted material consists in Nash's presentation and exposition, not in any of
the historical events. 691 F.Supp. 140 (N.D.Ill.1988). CBS then moved for
summary judgment, conceding for this purpose both access to Nash's books and
copying of the books' factual material. The court granted this motion, 704 F.Supp.
823, holding that The Dillinger Print did not appropriate any of the material
protected by Nash's copyrights.
CBS's concession removes from this case two questions that bedevil
copyright litigation. See Selle v. Gibb, 741 F.2d 896, 901-02 (7th Cir.1984). It
leaves the questions whether the copier used matter that the copyright law protects
and, if so, whether it took “too much” (that is, more than allowed by the “fair use”
doctrine codified in 17 U.S.C. § 107). See Atari, Inc. v. North American Philips
Consumer Electronics Corp., 672 F.2d 607, 614-17 (7th Cir.1982); Toksvig v. Bruce
Pub. Co., 181 F.2d 664 (7th Cir.1950). These latter questions have proven
especially difficult when, as in this case, the copier works in a medium different
from the original.
Learned Hand, whose opinions still dominate this corner of the law, observed
in Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir.1930), that all
depends on the level of abstraction at which the court conceives the interest
protected by the copyright. If the court chooses a low level (say, only the words the
first author employed), then a copier may take the plot, exposition, and all other
original material, even though these may be the most important ingredients of the
first author's contribution. As a practical matter this would mean that anyone could
produce the work in a new medium without compensating the original author,
238
despite the statute's grant to the author of the privilege to make “derivative
works”. If on the other hand the court should select a high level of abstraction, the
first author may claim protection for whole genres of work (“the romantic novel” or,
more modestly, any story involving doomed young lovers from warring clans, so
that a copyright on Romeo and Juliet would cover West Side Story too). Even a less
sweeping degree of abstraction creates a risk of giving copyright protection to “the
idea” although the statute protects only “expression”. 17 U.S.C. § 102(b); Holmes
v. Hurst, 174 U.S. 82, 86, 19 S.Ct. 606, 607, 43 L.Ed. 904 (1899); Mazer v. Stein,
347 U.S. 201, 217-18, 74 S.Ct. 460, 470, 98 L.Ed. 630 (1954); Rockford Map
Publishers, Inc. v. Directory Service Co., 768 F.2d 145 (7th Cir.1985); Miller v.
Universal City Studios, Inc., 650 F.2d 1365 (5th Cir.1981); United Telephone Co. v.
Johnson Publishing Co., 855 F.2d 604, 608-09 (8th Cir.1988).
Sometimes called the “abstractions test”, Hand's insight is not a “test” at all.
It is a clever way to pose the difficulties that require courts to avoid either extreme
of the continuum of generality. It does little to help resolve a given case, even
when melded with Hand's further observation, in cases such as Peter Pan Fabrics,
Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir.1960), that one may ask
what the “ordinary observer” would think are the essential parts of the two works'
“aesthetic appeal”. See also Selle, 741 F.2d at 903-05. Who is the “ordinary”
observer, and how does this person choose the level of generality? Ordinary
observers, like reasonable men in torts, are fictitious characters of the law,
reminders that judges must apply objective tests rather than examine their own
perceptions. They do not answer the essential question: at what level of generality?
After 200 years of wrestling with copyright questions, it is unlikely that courts will
come up with the answer any time soon, if indeed there is “an” answer, which we
doubt.
Hand returned again and again to the opposing forces that make the
formulation of a single approach so difficult. Intellectual (and artistic) progress is
possible only if each author builds on the work of others. No one invents even a tiny
fraction of the ideas that make up our cultural heritage. Once a work has been
written and published, any rule requiring people to compensate the author slows
progress in literature and art, making useful expressions “too expensive”, forcing
authors to re-invent the wheel, and so on. Every work uses scraps of thought from
thousands of predecessors, far too many to compensate even if the legal system
were frictionless, which it isn't. Because any new work depends on others even if
unconsciously, broad protection of intellectual property also creates a distinct
possibility that the cost of litigation—old authors trying to get a “piece of the action”
from current successes—will prevent or penalize the production of new works, even
though the claims be rebuffed. Authors as a group therefore might prefer limited
protection for their writings—they gain in the ability to use others' works more than
they lose in potential royalties. See William M. Landes & Richard A. Posner, An
Economic Analysis of Copyright Law, 18 J. Legal Studies 325, 332-33, 349-59
(1989).
Yet to deny authors all reward for the value their labors contribute to the
works of others also will lead to inefficiently little writing, just as surely as
239
excessively broad rights will do. The prospect of reward is an important stimulus for
thinking and writing, especially for persons such as Nash who are full-time authors.
Before the first work is published, broad protection of intellectual property seems
best; after it is published, narrow protection seems best. At each instant some new
works are in progress, and every author is simultaneously a creator in part and a
borrower in part. In these roles, the same person has different objectives. Yet only
one rule can be in force. This single rule must achieve as much as possible of these
inconsistent demands. Neither Congress nor the courts has the information that
would allow it to determine which is best. Both institutions must muddle through,
using not a fixed rule but a sense of the consequences of moving dramatically in
either direction.
If Nash had written a novel that another had translated into a screenplay,
this would be a difficult case. Although The Dillinger Print is substantially original, it
does not matter that almost all of the second author's expression is new. “[N]o
plagiarist can excuse the wrong by showing how much of his work he did not
pirate.” Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 56 (2d Cir.1936) (L.
Hand, J.). The TV drama took from Nash's works the idea that Dillinger survived
and retired to the west coast, and employed many of the ingredients that Nash
used to demonstrate that the man in the Cook County morgue was not Dillinger.
CBS even used one of Nash's books as a prop: “Twentieth Century Desperadoes” in
The Dillinger Print is a ringer for Nash's Bloodletters and Badmen. To see that The
Dillinger Print is in a sense a “derivative work”, we need only imagine how we
would react if Nash had written a short story based on the premise that Dillinger
was really a woman masquerading as a man, and CBS had used a switch in sex
roles as the centerpiece of a drama. In such an event we would need to decide, as
Hand did in Sheldon, whether the portions CBS took over were qualitatively so
important that the original author's market would be diminished excessively by a
rule allowing similar appropriations in the regular course.
Nash does not portray The Dillinger Dossier and its companion works as
fiction, however, which makes all the difference. The inventor of Sherlock Holmes
controls that character's fate while the copyright lasts; the first person to conclude
that Dillinger survived does not get dibs on history. If Dillinger survived, that fact is
available to all. Nash's rights lie in his expression: in his words, in his arrangement
of facts (his deployment of narration interspersed with interviews, for example), but
not in the naked “truth”. The Dillinger Print does not use any words from The
Dillinger Dossier or Nash's other books; it does not take over any of Nash's
presentation but instead employs a setting of its own invention with new exposition
and development. Physical differences between Dillinger and the corpse, planted
fingerprints, photographs of Dillinger and other gangsters in the 1930s, these and
all the rest are facts as Nash depicts them. (Nash did not take the photographs and
has no rights in them; The Dillinger Print used the photos but not Nash's
arrangement of them.)
The cases closest to ours are not plays translated to the movie screen (as in
Sheldon ) but movies made from speculative works representing themselves as
fact. For example, Universal made a motion picture based on the premise that an
240
idealistic crewman planted a bomb that destroyed the dirigible Hindenburg on May
6, 1937. The theory came straight from A.A. Hoehling's Who Destroyed the
Hindenburg? (1962), a monograph based on exhaustive research. The motion
picture added sub-plots and development, but the thesis and the evidence adduced
in support of it could be traced to Hoehling. Nonetheless, the Second Circuit
concluded that this did not infringe Hoehling's rights, because the book placed the
facts (as opposed to Hoehling's exposition) in the public domain. Hoehling v.
Universal City Studios, Inc., 618 F.2d 972 (1980). See also Miller v. Universal City
Studios (facts about a notorious kidnapping are not protected by copyright). Cf.
Musto v. Meyer, 434 F.Supp. 32 (S.D.N.Y.1977) (idea for The Seven Per Cent
Solution derived from article in medical journal).
Hoehling suggested that “[t]o avoid a chilling effect on authors who
contemplate tackling an historical issue or event, broad latitude must be granted to
subsequent authors who make use of historical subject matter, including theories or
plots”. 618 F.2d at 978. As our opinion in Toksvig shows, we are not willing to say
that “anything goes” as long as the first work is about history. Toksvig held that the
author of a biography of Hans Christian Andersen infringed the copyright of the
author of an earlier biography by using portions of Andersen's letters as well as
some of the themes and structure. Hoehling rejected Toksvig, see 618 F.2d at 979,
concluding that “[k]nowledge is expanded ... by granting new authors of historical
works a relatively free hand to build upon the work of their predecessors.” Id. at
980 (footnote omitted). With respect for our colleagues of the east, we think this
goes to the extreme of looking at incentives only ex post. The authors in Hoehling
and Toksvig spent years tracking down leads. If all of their work, right down to their
words, may be used without compensation, there will be too few original
investigations, and facts will not be available on which to build.
In Toksvig the first author, who knew Danish, spent three years learning
about Andersen's life; the second author, who knew no Danish, wrote her biography
in less than a year by copying out of the first book scenes and letters that the
original author discovered or translated. Reducing the return on such effort, by
allowing unhindered use, would make the initial leg-work less attractive and so less
frequent. Copyright law does not protect hard work (divorced from expression), and
hard work is not an essential ingredient of copyrightable expression (see Rockford
Map ); to the extent Toksvig confuses work or ideas with expression, it has been
justly criticized. Rosemont Enterprises, Inc. v. Random House, Inc., 366 F.2d 303,
310 (2d Cir.1966); Miller v. Universal City Studios, 650 F.2d at 1371; William F.
Patry, The Fair Use Privilege in Copyright Law 65-70 (1985). See also Eisenschiml
v. Fawcett Publications, Inc., 246 F.2d 598, 604 (7th Cir.1957) (recognizing both
that any two treatments of the same historical subject will be similar because the
facts limit the author's freedom, and that a scholar is entitled to use a
predecessor's work). We need not revisit Toksvig on its own facts to know that it is
a mistake to hitch up at either pole of the continuum between granting the first
author a right to forbid all similar treatments of history and granting the second
author a right to use anything he pleases of the first's work. Cf. New Era
Publications v. Henry Holt & Co., 873 F.2d 576 (2d Cir.), rehearing en banc denied,
884 F.2d 659 (1989).
241
Authors of fiction do not (necessarily) need greater incentives than authors of
non-fiction. Users of and elaborators on works of non-fiction are not (necessarily)
more easily dissuaded than are those who use or elaborate on works of fiction.
Decisions such as Hoehling do not come straight from first principles. They depend,
rather, on the language of what is now 17 U.S.C. § 102(b): “In no case does
copyright protection for an original work ... extend to any idea, ... or discovery,
regardless of the form in which it is described, explained, illustrated, or embodied in
such work.” Long before the 1976 revision of the statute, courts had decided that
historical facts are among the “ideas” and “discoveries” that the statute does not
cover. International News Service v. Associated Press, 248 U.S. 215, 234, 39 S.Ct.
68, 71, 63 L.Ed. 211 (1918). This is not a natural law; Congress could have made
copyright broader (as patent law is). But it is law, which will come as no surprise to
Nash. His own books are largely fresh expositions of facts looked up in other
people's books. Consider the introduction to the bibliography in Murder, America:
Homicide in the United States from the Revolution to the Present 447 (1980):
The research for this book was done in libraries and archives throughout the
United States, in addition to interviews and lengthy correspondence. The author's
own files, exceeding more than a quarter of a million separate entries and a
personal crime library of more than 25,000 volumes, were heavily employed.
The producers of Simon and Simon used Nash's work as Nash has used
others': as a source of facts and ideas, to which they added their distinctive
overlay. As the district court found, CBS did no more than § 102(b) permits.
Because The Dillinger Print uses Nash's analysis of history but none of his
expression, the judgment is affirmed.
Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.
125 S.Ct. 2764 (2005)
Justice SOUTER delivered the opinion of the Court.
The question is under what circumstances the distributor of a product
capable of both lawful and unlawful use is liable for acts of copyright infringement
by third parties using the product. We hold that one who distributes a device with
the object of promoting its use to infringe copyright, as shown by clear expression
or other affirmative steps taken to foster infringement, is liable for the resulting
acts of infringement by third parties.
I
A
Respondents, Grokster, Ltd., and StreamCast Networks, Inc., defendants in
the trial court, distribute free software products that allow computer users to share
242
electronic files through peer-to-peer networks, so called because users' computers
communicate directly with each other, not through central servers. The advantage
of peer-to-peer networks over information networks of other types shows up in
their substantial and growing popularity. Because they need no central computer
server to mediate the exchange of information or files among users, the highbandwidth communications capacity for a server may be dispensed with, and the
need for costly server storage space is eliminated. Since copies of a file
(particularly a popular one) are available on many users' computers, file requests
and retrievals may be faster than on other types of networks, and since file
exchanges do not travel through a server, communications can take place between
any computers that remain connected to the network without risk that a glitch in
the server will disable the network in its entirety. Given these benefits in security,
cost, and efficiency, peer-to-peer networks are employed to store and distribute
electronic files by universities, government agencies, corporations, and libraries,
among others.13
Other users of peer-to-peer networks include individual recipients of
Grokster's and StreamCast's software, and although the networks that they enjoy
through using the software can be used to share any type of digital file, they have
prominently employed those networks in sharing copyrighted music and video files
without authorization. A group of copyright holders (MGM for short, but including
motion picture studios, recording companies, songwriters, and music publishers)
sued Grokster and StreamCast for their users' copyright infringements, alleging
that they knowingly and intentionally distributed their software to enable users to
reproduce and distribute the copyrighted works in violation of the Copyright Act. . .
. MGM sought damages and an injunction.
Discovery during the litigation revealed the way the software worked, the
business aims of each defendant company, and the predilections of the users.
Grokster's eponymous software employs what is known as FastTrack technology, a
protocol developed by others and licensed to Grokster. StreamCast distributes a
very similar product except that its software, called Morpheus, relies on what is
known as Gnutella technology. A user who downloads and installs either software
possesses the protocol to send requests for files directly to the computers of others
using software compatible with FastTrack or Gnutella. On the FastTrack network
opened by the Grokster software, the user's request goes to a computer given an
indexing capacity by the software and designated a supernode, or to some other
computer with comparable power and capacity to collect temporary indexes of the
13 Peer-to-peer networks have disadvantages as well. Searches on peerto-peer networks may not reach and uncover all available files because
search requests may not be transmitted to every computer on the network.
There may be redundant copies of popular files. The creator of the software
has no incentive to minimize storage or bandwidth consumption, the costs of
which are borne by every user of the network. Most relevant here, it is
more difficult to control the content of files available for retrieval and the
behavior of users.
243
files available on the computers of users connected to it. The supernode (or
indexing computer) searches its own index and may communicate the search
request to other supernodes. If the file is found, the supernode discloses its
location to the computer requesting it, and the requesting user can download the
file directly from the computer located. The copied file is placed in a designated
sharing folder on the requesting user's computer, where it is available for other
users to download in turn, along with any other file in that folder.
In the Gnutella network made available by Morpheus, the process is mostly
the same, except that in some versions of the Gnutella protocol there are no
supernodes. In these versions, peer computers using the protocol communicate
directly with each other. When a user enters a search request into the Morpheus
software, it sends the request to computers connected with it, which in turn pass
the request along to other connected peers. The search results are communicated
to the requesting computer, and the user can download desired files directly from
peers’ computers. As this description indicates, Grokster and StreamCast use no
servers to intercept the content of the search requests or to mediate the file
transfers conducted by users of the software, there being no central point through
which the substance of the communications passes in either direction.
Although Grokster and StreamCast do not therefore know when particular
files are copied, a few searches using their software would show what is available
on the networks the software reaches. MGM commissioned a statistician to conduct
a systematic search, and his study showed that nearly 90% of the files available for
download on the FastTrack system were copyrighted works. Grokster and
StreamCast dispute this figure, raising methodological problems and arguing that
free copying even of copyrighted works may be authorized by the rightholders.
They also argue that potential noninfringing uses of their software are significant in
kind, even if infrequent in practice. Some musical performers, for example, have
gained new audiences by distributing their copyrighted works for free across peerto-peer networks, and some distributors of unprotected content have used peer-topeer networks to disseminate files, Shakespeare being an example. Indeed,
StreamCast has given Morpheus users the opportunity to download the briefs in this
very case, though their popularity has not been quantified.
As for quantification, the parties' anecdotal and statistical evidence entered
thus far to show the content available on the FastTrack and Gnutella networks does
not say much about which files are actually downloaded by users, and no one can
say how often the software is used to obtain copies of unprotected material. But
MGM's evidence gives reason to think that the vast majority of users' downloads
are acts of infringement, and because well over 100 million copies of the software
in question are known to have been downloaded, and billions of files are shared
across the FastTrack and Gnutella networks each month, the probable scope of
copyright infringement is staggering.
Grokster and StreamCast concede the infringement in most downloads, and
it is uncontested that they are aware that users employ their software primarily to
download copyrighted files, even if the decentralized FastTrack and Gnutella
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networks fail to reveal which files are being copied, and when. From time to time,
moreover, the companies have learned about their users' infringement directly, as
from users who have sent e-mail to each company with questions about playing
copyrighted movies they had downloaded, to whom the companies have responded
with guidance. And MGM notified the companies of 8 million copyrighted files that
could be obtained using their software.
Grokster and StreamCast are not, however, merely passive recipients of
information about infringing use. The record is replete with evidence that from the
moment Grokster and StreamCast began to distribute their free software, each one
clearly voiced the objective that recipients use it to download copyrighted works,
and each took active steps to encourage infringement.
After the notorious file-sharing service, Napster, was sued by copyright
holders for facilitation of copyright infringement, A & M Records, Inc. v. Napster,
Inc., 114 F.Supp.2d 896 (N.D.Cal.2000), aff'd in part, rev'd in part, 239 F.3d 1004
(C.A.9 2001), StreamCast gave away a software program of a kind known as
OpenNap, designed as compatible with the Napster program and open to Napster
users for downloading files from other Napster and OpenNap users' computers.
Evidence indicates that “[i]t was always [StreamCast's] intent to use [its OpenNap
network] to be able to capture email addresses of [its] initial target market so that
[it] could promote [its] StreamCast Morpheus interface to them,”; indeed, the
OpenNap program was engineered “‘to leverage Napster's 50 million user base.”
StreamCast monitored both the number of users downloading its OpenNap
program and the number of music files they downloaded. It also used the resulting
OpenNap network to distribute copies of the Morpheus software and to encourage
users to adopt it. Internal company documents indicate that StreamCast hoped to
attract large numbers of former Napster users if that company was shut down by
court order or otherwise, and that StreamCast planned to be the next Napster. A
kit developed by StreamCast to be delivered to advertisers, for example, contained
press articles about StreamCast's potential to capture former Napster users, and it
introduced itself to some potential advertisers as a company “which is similar to
what Napster was.” It broadcast banner advertisements to users of other Napstercompatible software, urging them to adopt its OpenNap. An internal e-mail from a
company executive stated: “‘We have put this network in place so that when
Napster pulls the plug on their free service ... or if the Court orders them shut down
prior to that ... we will be positioned to capture the flood of their 32 million users
that will be actively looking for an alternative.’” Thus, StreamCast developed
promotional materials to market its service as the best Napster alternative. One
proposed advertisement read: “Napster Inc. has announced that it will soon begin
charging you a fee. That's if the courts don't order it shut down first. What will you
do to get around it?” Another proposed ad touted StreamCast's software as the “#
1 alternative to Napster” and asked “[w]hen the lights went off at Napster ... where
245
did the users go?” (ellipsis in original).7 StreamCast even planned to flaunt the
illegal uses of its software; when it launched the OpenNap network, the chief
technology officer of the company averred that “[t]he goal is to get in trouble with
the law and get sued. It's the best way to get in the new[s].”
The evidence that Grokster sought to capture the market of former Napster
users is sparser but revealing, for Grokster launched its own OpenNap system
called Swaptor and inserted digital codes into its Web site so that computer users
using Web search engines to look for “Napster” or “[f]ree filesharing” would be
directed to the Grokster Web site, where they could download the Grokster
software. And Grokster's name is an apparent derivative of Napster.
StreamCast's executives monitored the number of songs by certain
commercial artists available on their networks, and an internal communication
indicates they aimed to have a larger number of copyrighted songs available on
their networks than other file-sharing networks. The point, of course, would be to
attract users of a mind to infringe, just as it would be with their promotional
materials developed showing copyrighted songs as examples of the kinds of files
available through Morpheus. Morpheus in fact allowed users to search specifically
for “Top 40” songs, which were inevitably copyrighted. Similarly, Grokster sent
users a newsletter promoting its ability to provide particular, popular copyrighted
materials.
In addition to this evidence of express promotion, marketing, and intent to
promote further, the business models employed by Grokster and StreamCast
confirm that their principal object was use of their software to download
copyrighted works. Grokster and StreamCast receive no revenue from users, who
obtain the software itself for nothing. Instead, both companies generate income by
selling advertising space, and they stream the advertising to Grokster and
Morpheus users while they are employing the programs. As the number of users of
each program increases, advertising opportunities become worth more. While there
is doubtless some demand for free Shakespeare, the evidence shows that
substantive volume is a function of free access to copyrighted work. Users seeking
Top 40 songs, for example, or the latest release by Modest Mouse, are certain to be
far more numerous than those seeking a free Decameron, and Grokster and
StreamCast translated that demand into dollars.
Finally, there is no evidence that either company made an effort to filter
copyrighted material from users' downloads or otherwise impede the sharing of
copyrighted files. Although Grokster appears to have sent e-mails warning users
about infringing content when it received threatening notice from the copyright
holders, it never blocked anyone from continuing to use its software to share
copyrighted files. StreamCast not only rejected another company's offer of help to
7The record makes clear that StreamCast developed these promotional materials but not whether
it released them to the public. Even if these advertisements were not released to the public and
do not show encouragement to infringe, they illuminate StreamCast's purposes
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monitor infringement, but blocked the Internet Protocol addresses of entities it
believed were trying to engage in such monitoring on its networks.
B
After discovery, the parties on each side of the case cross-moved for
summary judgment. The District Court . . . held that those who used the Grokster
and Morpheus software to download copyrighted media files directly infringed
MGM's copyrights, a conclusion not contested on appeal, but the court nonetheless
granted summary judgment in favor of Grokster and StreamCast as to any liability
arising from distribution of the then current versions of their software. Distributing
that software gave rise to no liability in the court's view, because its use did not
provide the distributors with actual knowledge of specific acts of infringement.
The Court of Appeals affirmed. In the court's analysis, a defendant was liable
as a contributory infringer when it had knowledge of direct infringement and
materially contributed to the infringement. But the court read Sony Corp. of
America v. Universal City Studios, Inc., 464 U.S. 417 (1984), as holding that
distribution of a commercial product capable of substantial noninfringing uses could
not give rise to contributory liability for infringement unless the distributor had
actual knowledge of specific instances of infringement and failed to act on that
knowledge. The fact that the software was capable of substantial noninfringing
uses in the Ninth Circuit's view meant that Grokster and StreamCast were not
liable, because they had no such actual knowledge, owing to the decentralized
architecture of their software. The court also held that Grokster and StreamCast
did not materially contribute to their users' infringement because it was the users
themselves who searched for, retrieved, and stored the infringing files, with no
involvement by the defendants beyond providing the software in the first place.
The Ninth Circuit also considered whether Grokster and StreamCast could be
liable under a theory of vicarious infringement. The court held against liability
because the defendants did not monitor or control the use of the software, had no
agreed-upon right or current ability to supervise its use, and had no independent
duty to police infringement. We granted certiorari.
II
A
MGM and many of the amici fault the Court of Appeals's holding for upsetting
a sound balance between the respective values of supporting creative pursuits
through copyright protection and promoting innovation in new communication
technologies by limiting the incidence of liability for copyright infringement. The
more artistic protection is favored, the more technological innovation may be
discouraged; the administration of copyright law is an exercise in managing the
trade-off. [cit.]
247
The tension between the two values is the subject of this case, with its claim
that digital distribution of copyrighted material threatens copyright holders as never
before, because every copy is identical to the original, copying is easy, and many
people (especially the young) use file-sharing software to download copyrighted
works. This very breadth of the software's use may well draw the public directly
into the debate over copyright policy, and the indications are that the ease of
copying songs or movies using software like Grokster's and Napster's is fostering
disdain for copyright protection. As the case has been presented to us, these fears
are said to be offset by the different concern that imposing liability, not only on
infringers but on distributors of software based on its potential for unlawful use,
could limit further development of beneficial technologies.8
The argument for imposing indirect liability in this case is, however, a
powerful one, given the number of infringing downloads that occur every day using
StreamCast's and Grokster's software. When a widely shared service or product is
used to commit infringement, it may be impossible to enforce rights in the
protected work effectively against all direct infringers, the only practical alternative
being to go against the distributor of the copying device for secondary liability on a
theory of contributory or vicarious infringement. See In re Aimster Copyright
Litigation, 334 F.3d 643, 645-646 (C.A.7 2003).
One infringes contributorily by intentionally inducing or encouraging direct
infringement, see Gershwin Pub. Corp. v. Columbia Artists Management, Inc., 443
F.2d 1159, 1162 (C.A.2 1971), and infringes vicariously by profiting from direct
infringement while declining to exercise a right to stop or limit it, Shapiro, Bernstein
& Co. v. H.L. Green Co., 316 F.2d 304, 307 (C.A.2 1963).9 Although “[t]he
Copyright Act does not expressly render anyone liable for infringement committed
by another,” Sony Corp. v. Universal City Studios, 464 U.S., at 434, these doctrines
of secondary liability emerged from common law principles and are well established
in the law, id., at 486 (Blackmun, J., dissenting); [cit.].
8The mutual exclusivity of these values should not be overstated, however. On the one hand
technological innovators, including those writing file-sharing computer programs, may wish for
effective copyright protections for their work [cit.] On the other hand the widespread
distribution of creative works through improved technologies may enable the synthesis of new
works or generate audiences for emerging artists. [cit.]
9We stated in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), that
“‘the lines between direct infringement, contributory infringement and vicarious liability are not
clearly drawn’ ....[R]easoned analysis of [the Sony plaintiffs' contributory infringement claim]
necessarily entails consideration of arguments and case law which may also be forwarded under
the other labels, and indeed the parties ... rely upon such arguments and authority in support of
their respective positions on the issue of contributory infringement,” [cit]. In the present case
MGM has argued a vicarious liability theory, which allows imposition of liability when the
defendant profits directly from the infringement and has a right and ability to supervise the direct
infringer, even if the defendant initially lacks knowledge of the infringement. [cit.] Because we
resolve the case based on an inducement theory, there is no need to analyze separately MGM's
vicarious liability theory.
248
B
Despite the currency of these principles of secondary liability, this Court has
dealt with secondary copyright infringement in only one recent case, and because
MGM has tailored its principal claim to our opinion there, a look at our earlier
holding is in order. In Sony Corp. v. Universal City Studios, this Court addressed a
claim that secondary liability for infringement can arise from the very distribution of
a commercial product. There, the product, novel at the time, was what we know
today as the videocassette recorder or VCR. Copyright holders sued Sony as the
manufacturer, claiming it was contributorily liable for infringement that occurred
when VCR owners taped copyrighted programs because it supplied the means used
to infringe, and it had constructive knowledge that infringement would occur. At
the trial on the merits, the evidence showed that the principal use of the VCR was
for “ ‘time-shifting,’ ” or taping a program for later viewing at a more convenient
time, which the Court found to be a fair, not an infringing, use. There was no
evidence that Sony had expressed an object of bringing about taping in violation of
copyright or had taken active steps to increase its profits from unlawful taping.
Although Sony's advertisements urged consumers to buy the VCR to “‘record
favorite shows'” or “ ‘build a library’ ” of recorded programs, neither of these uses
was necessarily infringing.
On those facts, with no evidence of stated or indicated intent to promote
infringing uses, the only conceivable basis for imposing liability was on a theory of
contributory infringement arising from its sale of VCRs to consumers with
knowledge that some would use them to infringe. But because the VCR was
“capable of commercially significant noninfringing uses,” we held the manufacturer
could not be faulted solely on the basis of its distribution.
This analysis reflected patent law's traditional staple article of commerce
doctrine, now codified, that distribution of a component of a patented device will
not violate the patent if it is suitable for use in other ways. 35 U.S.C. § 271(c);
[cit]. The doctrine was devised to identify instances in which it may be presumed
from distribution of an article in commerce that the distributor intended the article
to be used to infringe another's patent, and so may justly be held liable for that
infringement. “One who makes and sells articles which are only adapted to be used
in a patented combination will be presumed to intend the natural consequences of
his acts; he will be presumed to intend that they shall be used in the combination
of the patent.” [cit.]
In sum, where an article is “good for nothing else” but infringement, [cit.],
there is no legitimate public interest in its unlicensed availability, and there is no
injustice in presuming or imputing an intent to infringe. [cit]. Conversely, the
doctrine absolves the equivocal conduct of selling an item with substantial lawful as
well as unlawful uses, and limits liability to instances of more acute fault than the
mere understanding that some of one's products will be misused. It leaves
breathing room for innovation and a vigorous commerce. See Sony Corp. v.
Universal City Studios, supra, at 442; [cit].
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The parties and many of the amici in this case think the key to resolving it is
the Sony rule and, in particular, what it means for a product to be “capable of
commercially significant noninfringing uses.” Sony Corp. v. Universal City Studios,
supra, at 442. MGM advances the argument that granting summary judgment to
Grokster and StreamCast as to their current activities gave too much weight to the
value of innovative technology, and too little to the copyrights infringed by users of
their software, given that 90% of works available on one of the networks was
shown to be copyrighted. Assuming the remaining 10% to be its noninfringing use,
MGM says this should not qualify as “substantial,” and the Court should quantify
Sony to the extent of holding that a product used “principally” for infringement does
not qualify. As mentioned before, Grokster and StreamCast reply by citing
evidence that their software can be used to reproduce public domain works, and
they point to copyright holders who actually encourage copying. Even if
infringement is the principal practice with their software today, they argue, the
noninfringing uses are significant and will grow.
We agree with MGM that the Court of Appeals misapplied Sony, which it read
as limiting secondary liability quite beyond the circumstances to which the case
applied. Sony barred secondary liability based on presuming or imputing intent to
cause infringement solely from the design or distribution of a product capable of
substantial lawful use, which the distributor knows is in fact used for infringement.
The Ninth Circuit has read Sony's limitation to mean that whenever a product is
capable of substantial lawful use, the producer can never be held contributorily
liable for third parties' infringing use of it; it read the rule as being this broad, even
when an actual purpose to cause infringing use is shown by evidence independent
of design and distribution of the product, unless the distributors had “specific
knowledge of infringement at a time at which they contributed to the infringement,
and failed to act upon that information.” Because the Circuit found the StreamCast
and Grokster software capable of substantial lawful use, it concluded on the basis of
its reading of Sony that neither company could be held liable, since there was no
showing that their software, being without any central server, afforded them
knowledge of specific unlawful uses.
This view of Sony, however, was error, converting the case from one about liability
resting on imputed intent to one about liability on any theory. Because Sony did
not displace other theories of secondary liability, and because we find below that it
was error to grant summary judgment to the companies on MGM's inducement
claim, we do not revisit Sony further, as MGM requests, to add a more quantified
description of the point of balance between protection and commerce when liability
rests solely on distribution with knowledge that unlawful use will occur. It is
enough to note that the Ninth Circuit's judgment rested on an erroneous
understanding of Sony and to leave further consideration of the Sony rule for a day
when that may be required.
C
Sony's rule limits imputing culpable intent as a matter of law from the
characteristics or uses of a distributed product. But nothing in Sony requires courts
to ignore evidence of intent if there is such evidence, and the case was never
250
meant to foreclose rules of fault-based liability derived from the common law.10
Sony Corp. v. Universal City Studios, 464 U.S., at 439 (“If vicarious liability is to be
imposed on Sony in this case, it must rest on the fact that it has sold equipment
with constructive knowledge” of the potential for infringement). Thus, where
evidence goes beyond a product's characteristics or the knowledge that it may be
put to infringing uses, and shows statements or actions directed to promoting
infringement, Sony's staple-article rule will not preclude liability.
The classic case of direct evidence of unlawful purpose occurs when one
induces commission of infringement by another, or “entic[es] or persuad[es]
another” to infringe, Black's Law Dictionary 790 (8th ed.2004), as by advertising.
Thus at common law a copyright or patent defendant who “not only expected but
invoked [infringing use] by advertisement” was liable for infringement “on
principles recognized in every part of the law.” Kalem Co. v. Harper Brothers, 222
U.S., at 62-63 (copyright infringement). See also Henry v. A.B. Dick Co., 224
U.S., at 48-49 (contributory liability for patent infringement may be found where a
good's “most conspicuous use is one which will co-operate in an infringement when
sale to such user is invoked by advertisement” of the infringing use); [cit]; Rumford
Chemical Works v. Hecker, 20 F.Cas. 1342, 1346 (No. 12,133) (C.C.D.N.J.1876)
(demonstrations of infringing activity along with “avowals of the [infringing]
purpose and use for which it was made” supported liability for patent infringement).
The rule on inducement of infringement as developed in the early cases is no
different today. Evidence of “active steps ... taken to encourage direct
infringement,” Oak Industries, Inc. v. Zenith Electronics Corp., 697 F.Supp. 988,
992 (N.D.Ill.1988), such as advertising an infringing use or instructing how to
engage in an infringing use, show an affirmative intent that the product be used to
infringe, and a showing that infringement was encouraged overcomes the law's
reluctance to find liability when a defendant merely sells a commercial product
suitable for some lawful use, [cit.]
For the same reasons that Sony took the staple-article doctrine of patent law as a
model for its copyright safe-harbor rule, the inducement rule, too, is a sensible one
for copyright. We adopt it here, holding that one who distributes a device with the
object of promoting its use to infringe copyright, as shown by clear expression or
other affirmative steps taken to foster infringement, is liable for the resulting acts
of infringement by third parties. We are, of course, mindful of the need to keep
from trenching on regular commerce or discouraging the development of
technologies with lawful and unlawful potential. Accordingly, just as Sony did not
find intentional inducement despite the knowledge of the VCR manufacturer that its
device could be used to infringe, mere knowledge of infringing potential or of actual
infringing uses would not be enough here to subject a distributor to liability. Nor
would ordinary acts incident to product distribution, such as offering customers
technical support or product updates, support liability in themselves. The
inducement rule, instead, premises liability on purposeful, culpable expression and
10Nor does the Patent Act's exemption from liability for those who distribute a staple article of
commerce, 35 U.S.C. § 271(c), extend to those who induce patent infringement, § 271(b).
251
conduct, and thus does nothing to compromise legitimate commerce or discourage
innovation having a lawful promise.
III
A
The only apparent question about treating MGM's evidence as sufficient to
withstand summary judgment under the theory of inducement goes to the need on
MGM's part to adduce evidence that StreamCast and Grokster communicated an
inducing message to their software users. The classic instance of inducement is by
advertisement or solicitation that broadcasts a message designed to stimulate
others to commit violations. MGM claims that such a message is shown here. It is
undisputed that StreamCast beamed onto the computer screens of users of
Napster-compatible programs ads urging the adoption of its OpenNap program,
which was designed, as its name implied, to invite the custom of patrons of
Napster, then under attack in the courts for facilitating massive infringement.
Those who accepted StreamCast's OpenNap program were offered software to
perform the same services, which a factfinder could conclude would readily have
been understood in the Napster market as the ability to download copyrighted
music files. Grokster distributed an electronic newsletter containing links to articles
promoting its software's ability to access popular copyrighted music. And anyone
whose Napster or free file-sharing searches turned up a link to Grokster would have
understood Grokster to be offering the same file-sharing ability as Napster, and to
the same people who probably used Napster for infringing downloads; that would
also have been the understanding of anyone offered Grokster's suggestively named
Swaptor software, its version of OpenNap. And both companies communicated a
clear message by responding affirmatively to requests for help in locating and
playing copyrighted materials.
In StreamCast's case, of course, the evidence just described was
supplemented by other unequivocal indications of unlawful purpose in the internal
communications and advertising designs aimed at Napster users (“When the lights
went off at Napster ... where did the users go?”). Whether the messages were
communicated is not to the point on this record. The function of the message in
the theory of inducement is to prove by a defendant's own statements that his
unlawful purpose disqualifies him from claiming protection (and incidentally to point
to actual violators likely to be found among those who hear or read the message).
Proving that a message was sent out, then, is the preeminent but not exclusive way
of showing that active steps were taken with the purpose of bringing about
infringing acts, and of showing that infringing acts took place by using the device
distributed. Here, the summary judgment record is replete with other evidence
that Grokster and StreamCast, unlike the manufacturer and distributor in Sony,
acted with a purpose to cause copyright violations by use of software suitable for
illegal use.
Three features of this evidence of intent are particularly notable. First, each
company showed itself to be aiming to satisfy a known source of demand for
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copyright infringement, the market comprising former Napster users. StreamCast's
internal documents made constant reference to Napster, it initially distributed its
Morpheus software through an OpenNap program compatible with Napster, it
advertised its OpenNap program to Napster users, and its Morpheus software
functions as Napster did except that it could be used to distribute more kinds of
files, including copyrighted movies and software programs. Grokster's name is
apparently derived from Napster, it too initially offered an OpenNap program, its
software's function is likewise comparable to Napster's, and it attempted to divert
queries for Napster onto its own Web site. Grokster and StreamCast's efforts to
supply services to former Napster users, deprived of a mechanism to copy and
distribute what were overwhelmingly infringing files, indicate a principal, if not
exclusive, intent on the part of each to bring about infringement.
Second, this evidence of unlawful objective is given added significance by MGM's
showing that neither company attempted to develop filtering tools or other
mechanisms to diminish the infringing activity using their software. While the Ninth
Circuit treated the defendants' failure to develop such tools as irrelevant because
they lacked an independent duty to monitor their users' activity, we think this
evidence underscores Grokster's and StreamCast's intentional facilitation of their
users' infringement.12
Third, there is a further complement to the direct evidence of unlawful
objective. It is useful to recall that StreamCast and Grokster make money by
selling advertising space, by directing ads to the screens of computers employing
their software. As the record shows, the more the software is used, the more ads
are sent out and the greater the advertising revenue becomes. Since the extent of
the software's use determines the gain to the distributors, the commercial sense of
their enterprise turns on high-volume use, which the record shows is infringing.
This evidence alone would not justify an inference of unlawful intent, but viewed in
the context of the entire record its import is clear.
The unlawful objective is unmistakable.
B
In addition to intent to bring about infringement and distribution of a device
suitable for infringing use, the inducement theory of course requires evidence of
actual infringement by recipients of the device, the software in this case. As the
account of the facts indicates, there is evidence of infringement on a gigantic scale,
and there is no serious issue of the adequacy of MGM's showing on this point in
order to survive the companies' summary judgment requests. Although an exact
calculation of infringing use, as a basis for a claim of damages, is subject to
dispute, there is no question that the summary judgment evidence is at least
adequate to entitle MGM to go forward with claims for damages and equitable relief.
12Of course, in the absence of other evidence of intent, a court would be unable to find
contributory infringement liability merely based on a failure to take affirmative steps to prevent
infringement, if the device otherwise was capable of substantial noninfringing uses. Such a
holding would tread too close to the Sony safe harbor
253
***
In sum, this case is significantly different from Sony and reliance on that
case to rule in favor of StreamCast and Grokster was error. Sony dealt with a claim
of liability based solely on distributing a product with alternative lawful and unlawful
uses, with knowledge that some users would follow the unlawful course. The case
struck a balance between the interests of protection and innovation by holding that
the product's capability of substantial lawful employment should bar the imputation
of fault and consequent secondary liability for the unlawful acts of others.
MGM's evidence in this case most obviously addresses a different basis of
liability for distributing a product open to alternative uses. Here, evidence of the
distributors' words and deeds going beyond distribution as such shows a purpose to
cause and profit from third-party acts of copyright infringement. If liability for
inducing infringement is ultimately found, it will not be on the basis of presuming or
imputing fault, but from inferring a patently illegal objective from statements and
actions showing what that objective was.
There is substantial evidence in MGM's favor on all elements of inducement, and
summary judgment in favor of Grokster and StreamCast was error. On remand,
reconsideration of MGM's motion for summary judgment will be in order.
The judgment of the Court of Appeals is vacated, and the case is remanded
for further proceedings consistent with this opinion.
It is so ordered.
Justice GINSBURG, with whom THE CHIEF JUSTICE and Justice KENNEDY join,
concurring
I concur in the Court's decision, which vacates in full the judgment of the
Court of Appeals for the Ninth Circuit, and write separately to clarify why I conclude
that the Court of Appeals misperceived, and hence misapplied, our holding in Sony
Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984). There is
here at least a “genuine issue as to [a] material fact,” on the liability of Grokster or
StreamCast, not only for actively inducing copyright infringement, but also or
alternatively, based on the distribution of their software products, for contributory
copyright infringement. On neither score was summary judgment for Grokster and
StreamCast warranted.
....
[T]he [Sony] Court considered whether “a significant number of [potential
uses of the Betamax were] noninfringing.” The Court homed in on one potential
use-private, noncommercial time-shifting of television programs in the home (i.e.,
recording a broadcast TV program for later personal viewing). Time-shifting was
noninfringing, the Court concluded, because in some cases trial testimony showed it
was authorized by the copyright holder, and in others it qualified as legitimate fair
use. Most purchasers used the Betamax principally to engage in time-shifting, a
use that “plainly satisfie[d]” the Court's standard. Thus, there was no need in Sony
254
to “give precise content to the question of how much [actual or potential] use is
commercially significant.”1 Further development was left for later days and cases.
The Ninth Circuit went astray, I will endeavor to explain, when that court
granted summary judgment to Grokster and StreamCast on the charge of
contributory liability based on distribution of their software products. Relying on its
earlier opinion in A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (C.A.9 2001),
the Court of Appeals held that “if substantial noninfringing use was shown, the
copyright owner would be required to show that the defendant had reasonable
knowledge of specific infringing files.” 380 F.3d 1154, 1161 (C.A.9 2004). “A
careful examination of the record,” the court concluded, “indicates that there is no
genuine issue of material fact as to noninfringing use.” Ibid. The appeals court
pointed to the band Wilco, which made one of its albums available for free
downloading, to other recording artists who may have authorized free distribution
of their music through the Internet, and to public domain literary works and films
available through Grokster's and StreamCast's software. Ibid. Although it
acknowledged MGM's assertion that “the vast majority of the software use is for
copyright infringement,” the court concluded that Grokster's and StreamCast's
proffered evidence met Sony's requirement that “a product need only be capable of
substantial noninfringing uses.”2
1Justice Breyer finds in Sony Corp. of America v. Universal City Studios, Inc., a “clear” rule
permitting contributory liability for copyright infringement based on distribution of a product
only when the product “will be used almost exclusively to infringe copyrights.” Post, at 2791. . .
Sony, as I read it, contains no clear, near-exclusivity test. Nor have Courts of Appeals
unanimously recognized Justice Breyer's clear rule. Compare A & M Records, Inc. v. Napster,
Inc., 239 F.3d 1004, 1021 (C.A.9 2001) (“[E]vidence of actual knowledge of specific acts of
infringement is required to hold a computer system operator liable for contributory copyright
infringement.”), with In re Aimster Copyright Litigation, 334 F.3d 643, 649-650 (C.A.7 2003)
(“[W]hen a supplier is offering a product or service that has noninfringing as well as infringing
uses, some estimate of the respective magnitudes of these uses is necessary for a finding of
contributory infringement. ... But the balancing of costs and benefits is necessary only in a case
in which substantial noninfringing uses, present or prospective, are demonstrated.”). See also
Matthew Bender & Co., Inc. v. West Pub. Co., 158 F.3d 693, 707 (C.A.2 1998) (“The Supreme
Court applied [the Sony ] test to prevent copyright holders from leveraging the copyrights in their
original work to control distribution of ... products that might be used incidentally for
infringement, but that had substantial noninfringing uses .... The same rationale applies here [to
products] that have substantial, predominant and noninfringing uses as tools for research and
citation.”). All Members of the Court agree, moreover, that “the Court of Appeals misapplied
Sony,” at least to the extent it read that decision to limit “secondary liability” to a hardly-ever
category, “quite beyond the circumstances to which the case applied.”
2Grokster and StreamCast, in the Court of Appeals' view, would be entitled to summary
judgment unless MGM could show that that the software companies had knowledge of specific
acts of infringement and failed to act on that knowledge-a standard the court held MGM could
not meet.
255
This case differs markedly from Sony. Cf. Peters, Brace Memorial Lecture:
Copyright Enters the Public Domain, 51 J. Copyright Soc. 701, 724 (2004) (“The
Grokster panel's reading of Sony is the broadest that any court has given it ....”).
Here, there has been no finding of any fair use and little beyond anecdotal evidence
of noninfringing uses. In finding the Grokster and StreamCast software products
capable of substantial noninfringing uses, the District Court and the Court of
Appeals appear to have relied largely on declarations submitted by the defendants.
These declarations include assertions (some of them hearsay) that a number of
copyright owners authorize distribution of their works on the Internet and that
some public domain material is available through peer-to-peer networks including
those accessed through Grokster's and StreamCast's software.
The District Court declared it “undisputed that there are substantial
noninfringing uses for Defendants' software,” thus obviating the need for further
proceedings. 259 F.Supp.2d, at 1035. This conclusion appears to rest almost
entirely on the collection of declarations submitted by Grokster and StreamCast.
Review of these declarations reveals mostly anecdotal evidence, sometimes
obtained second-hand, of authorized copyrighted works or public domain works
available online and shared through peer-to-peer networks, and general statements
about the benefits of peer-to-peer technology. See, e.g., Decl. of Janis Ian ¶ 13,
App. 128 (“P2P technologies offer musicians an alternative channel for promotion
and distribution.”); Decl. of Gregory Newby ¶ 12, id., at 136 (“Numerous
authorized and public domain Project Gutenberg eBooks are made available on
Morpheus, Kazaa, Gnutella, Grokster, and similar software products.”); Decl. of
Aram Sinnreich ¶ 6, id., at 151 (“file sharing seems to have a net positive impact
on music sales”); Decl. of John Busher ¶ 8, id., at 166 (“I estimate that Acoustica
generates sales of between $1,000 and $10,000 per month as a result of the
distribution of its trialware software through the Gnutella and FastTrack
Networks.”); Decl. of Patricia D. Hoekman ¶¶ 3-4, id., at 169-170 (search on
Morpheus for “President Bush speeches” found several video recordings, searches
for “Declaration of Independence” and “Bible” found various documents and
declarant was able to download a copy of the Declaration); Decl. of Sean L. Mayers
¶ 11, id., at 67 (“Existing open, decentralized peer-to-peer file-sharing networks ...
offer content owners distinct business advantages over alternate online distribution
technologies.”). Compare Decl. of Brewster Kahle ¶ 20, id., at 142 (“Those who
download the Prelinger films ... are entitled to redistribute those files, and the
Archive welcomes their redistribution by the Morpheus-Grokster-KaZaa community
of users.”), with Deposition of Brewster Kahle, id., at 396-403 (Sept. 18, 2002)
(testifying that he has no knowledge of any person downloading a Prelinger film
using Morpheus, Grokster, or KaZaA). Compare also Decl. of Richard Prelinger ¶
17, id., at 147 (“[W]e welcome further redistribution of the Prelinger films ... by
individuals using peer-to-peer software products like Morpheus, KaZaA and
Grokster.”), with Deposition of Richard Prelinger, id., at 410-411 (Oct. 1, 2002)
(“Q. What is your understanding of Grokster? A. I have no understanding of
Grokster .... Q. Do you know whether any user of the Grokster software has made
available to share any Prelinger film? A. No.”). . . .These declarations do not
256
support summary judgment in the face of evidence, proffered by MGM, of
overwhelming use of Grokster's and StreamCast's software for infringement.3
Even if the absolute number of noninfringing files copied using the Grokster
and StreamCast software is large, it does not follow that the products are therefore
put to substantial noninfringing uses and are thus immune from liability. The
number of noninfringing copies may be reflective of, and dwarfed by, the huge total
volume of files shared. Further, the District Court and the Court of Appeals did not
sharply distinguish between uses of Grokster's and StreamCast's software products
(which this case is about) and uses of peer-to-peer technology generally (which this
case is not about).
In sum, when the record in this case was developed, there was evidence that
Grokster's and StreamCast's products were, and had been for some time,
overwhelmingly used to infringe, and that this infringement was the overwhelming
source of revenue from the products. Fairly appraised, the evidence was
insufficient to demonstrate, beyond genuine debate, a reasonable prospect that
substantial or commercially significant noninfringing uses were likely to develop
over time. On this record, the District Court should not have ruled dispositively on
the contributory infringement charge by granting summary judgment to Grokster
and StreamCast.4
If, on remand, the case is not resolved on summary judgment in favor of
MGM based on Grokster and StreamCast actively inducing infringement, the Court
of Appeals, I would emphasize, should reconsider, on a fuller record, its
interpretation of Sony's product distribution holding.
3Justice Breyer finds support for summary judgment in this motley collection of declarations and
in a survey conducted by an expert retained by MGM. That survey identified 75% of the files
available through Grokster as copyrighted works owned or controlled by the plaintiffs, and 15%
of the files as works likely copyrighted. As to the remaining 10% of the files, “there was not
enough information to form reasonable conclusions either as to what those files even consisted
of, and/or whether they were infringing or non-infringing.” Even assuming, as Justice Breyer
does, that the Sony Court would have absolved Sony of contributory liability solely on the basis
of the use of the Betamax for authorized time-shifting, summary judgment is not inevitably
appropriate here. Sony stressed that the plaintiffs there owned “well below 10%” of copyrighted
television programming, and found, based on trial testimony from representatives of the four
major sports leagues and other individuals authorized to consent to home-recording of their
copyrighted broadcasts, that a similar percentage of program copying was authorized. Here, the
plaintiffs allegedly control copyrights for 70% or 75% of the material exchanged through the
Grokster and StreamCast software, and the District Court does not appear to have relied on
comparable testimony about authorized copying from copyright holders.
4The District Court's conclusion that “[p]laintiffs do not dispute that Defendants' software is
being used, and could be used, for substantial noninfringing purposes,” is, to say the least,
dubious. In the courts below and in this Court, MGM has continuously disputed any such
conclusion. . . .
257
Justice BREYER, with whom Justice STEVENS and Justice O'CONNOR join,
concurring.
I agree with the Court that the distributor of a dual-use technology may be
liable for the infringing activities of third parties where he or she actively seeks to
advance the infringement. I further agree that, in light of our holding today, we
need not now “revisit” Sony. . . Other Members of the Court, however, take up the
Sony question: whether Grokster's product is “capable of ‘substantial’ or
‘commercially significant’ noninfringing uses.” And they answer that question by
stating that the Court of Appeals was wrong when it granted summary judgment on
the issue in Grokster's favor. I write to explain why I disagree with them on this
matter.
I
....
A
I begin with Sony's standard. In Sony, the Court considered the potential
copyright liability of a company that did not itself illegally copy protected material,
but rather sold a machine-a Video Cassette Recorder (VCR)-that could be used to
do so. . . . Sony knew many customers would use its VCRs to engage in
unauthorized copying and “ ‘library-building.’” But that fact, said the Court, was
insufficient to make Sony itself an infringer. And the Court ultimately held that
Sony was not liable for its customers' acts of infringement.
[T]he Court wrote that the sale of copying equipment, “like the sale of other
articles of commerce, does not constitute contributory infringement if the product is
widely used for legitimate, unobjectionable purposes. Indeed, it need merely be
capable of substantial noninfringing uses.” The Court ultimately characterized the
legal “question” in the particular case as “whether [Sony's VCR] is capable of
commercially significant noninfringing uses ” (while declining to give “precise
content” to these terms).
It then applied this standard. The Court had before it a survey
(commissioned by the District Court and then prepared by the respondents)
showing that roughly 9% of all VCR recordings were of the type—namely, religious,
educational, and sports programming—owned by producers and distributors
testifying on Sony's behalf who did not object to time-shifting. A much higher
percentage of VCR users had at one point taped an authorized program, in addition
to taping unauthorized programs. And the plaintiffs—not a large class of content
providers as in this case—owned only a small percentage of the total available
unauthorized programming. But of all the taping actually done by Sony's
customers, only around 9% was of the sort the Court referred to as authorized.
The Court found that the magnitude of authorized programming was
“significant,” and it also noted the “significant potential for future authorized
258
copying.” The Court supported this conclusion by referencing the trial testimony of
professional sports league officials and a religious broadcasting representative. It
also discussed (1) a Los Angeles educational station affiliated with the Public
Broadcasting Service that made many of its programs available for home taping,
and (2) Mr. Rogers' Neighborhood, a widely watched children's program. On the
basis of this testimony and other similar evidence, the Court determined that
producers of this kind had authorized duplication of their copyrighted programs “in
significant enough numbers to create a substantial market for a noninfringing use
of the” VCR. Id., at 447, n. 28, 104 S.Ct. 774 (emphasis added).
The Court, in using the key word “substantial,” indicated that these
circumstances alone constituted a sufficient basis for rejecting the imposition of
secondary liability. See id., at 456 (“Sony demonstrated a significant likelihood
that substantial numbers of copyright holders” would not object to time-shifting
(emphasis added)). Nonetheless, the Court buttressed its conclusion by finding
separately that, in any event, unauthorized timeshifting often constituted not
infringement, but “fair use.” Id., at 447-456.
B
When measured against Sony's underlying evidence and analysis, the
evidence now before us shows that Grokster passes Sony's test—that is, whether
the company's product is capable of substantial or commercially significant
noninfringing uses. For one thing, petitioners' (hereinafter MGM) own expert
declared that 75% of current files available on Grokster are infringing and 15% are
“likely infringing.” That leaves some number of files near 10% that apparently are
noninfringing, a figure very similar to the 9% or so of authorized time-shifting uses
of the VCR that the Court faced in Sony.
As in Sony, witnesses here explained the nature of the noninfringing files on
Grokster's network without detailed quantification. Those files include: [authorized
copies of music by artists such as Wilco, Janis Ian, Pearl Jam, Dave Matthews, John
Mayer, and others; free electronic books and other works from various online
publishers, including Project Gutenberg; public domain and authorized software,
such as WinZip 8.1; and licensed music videos and television and movie segments
distributed via digital video packaging with the permission of the copyright holder.]
The nature of these and other lawfully swapped files is such that it is
reasonable to infer quantities of current lawful use roughly approximate to those at
issue in Sony. At least, MGM has offered no evidence sufficient to survive summary
judgment that could plausibly demonstrate a significant quantitative difference. To
be sure, in quantitative terms these uses account for only a small percentage of the
total number of uses of Grokster's product. But the same was true in Sony, which
characterized the relatively limited authorized copying market as “substantial.”
(The Court made clear as well in Sony that the amount of material then presently
available for lawful copying-if not actually copied-was significant, and the same is
certainly true in this case.)
259
Importantly, Sony also used the word “capable,” asking whether the product
is “capable of ”substantial noninfringing uses. Its language and analysis suggest
that a figure like 10%, if fixed for all time, might well prove insufficient, but that
such a figure serves as an adequate foundation where there is a reasonable
prospect of expanded legitimate uses over time. See ibid. (noting a “significant
potential for future authorized copying”). And its language also indicates the
appropriateness of looking to potential future uses of the product to determine its
“capability.”
Here the record reveals a significant future market for noninfringing uses of
Grokster-type peer-to-peer software. Such software permits the exchange of any
sort of digital file-whether that file does, or does not, contain copyrighted material.
As more and more uncopyrighted information is stored in swappable form, it seems
a likely inference that lawful peer-to-peer sharing will become increasingly
prevalent. . . .
And that is just what is happening. Such legitimate noninfringing uses are
coming to include the swapping of: research information (the initial purpose of
many peer-to-peer networks); public domain films (e.g., those owned by the
Prelinger Archive); historical recordings and digital educational materials (e.g.,
those stored on the Internet Archive); digital photos (OurPictures, for example, is
starting a P2P photo-swapping service); “shareware” and “freeware” (e.g., Linux
and certain Windows software); secure licensed music and movie files (Intent
MediaWorks, for example, protects licensed content sent across P2P networks);
news broadcasts past and present (the BBC Creative Archive lets users “rip, mix
and share the BBC”); user-created audio and video files (including “podcasts” that
may be distributed through P2P software); and all manner of free “open content”
works collected by Creative Commons (one can search for Creative Commons
material on StreamCast). I can find nothing in the record that suggests that this
course of events will not continue to flow naturally as a consequence of the
character of the software taken together with the foreseeable development of the
Internet and of information technology. Cf. ante, at 2770 (opinion of the Court)
(discussing the significant benefits of peer-to-peer technology).
There may be other now-unforeseen noninfringing uses that develop for
peer-to-peer software, just as the home-video rental industry (unmentioned in
Sony) developed for the VCR. But the foreseeable development of such uses, when
taken together with an estimated 10% noninfringing material, is sufficient to meet
Sony's standard. And while Sony considered the record following a trial, there are
no facts asserted by MGM in its summary judgment filings that lead me to believe
the outcome after a trial here could be any different. The lower courts reached the
same conclusion.
Of course, Grokster itself may not want to develop these other noninfringing
uses. But Sony's standard seeks to protect not the Groksters of this world (which
in any event may well be liable under today's holding), but the development of
technology more generally. And Grokster's desires in this respect are beside the
point.
260
II
The real question here, I believe, is not whether the record evidence satisfies
Sony. As I have interpreted the standard set forth in that case, it does. And of the
Courts of Appeals that have considered the matter, only one has proposed
interpreting Sony more strictly than I would do-in a case where the product might
have failed under any standard. In re Aimster Copyright Litigation, 334 F.3d 643,
653 (C.A.7 2003) (defendant “failed to show that its service is ever used for any
purpose other than to infringe” copyrights (emphasis added)); [cit].
Instead, the real question is whether we should modify the Sony standard, as
MGM requests, or interpret Sony more strictly, as I believe Justice Ginsburg's
approach would do in practice. Compare ante, at 2784-2787 (concurring)
(insufficient evidence in this case of both present lawful uses and of a reasonable
prospect that substantial noninfringing uses would develop over time), with Sony,
464 U.S., at 442-47 (basing conclusion as to the likely existence of a substantial
market for authorized copying upon general declarations, some survey data, and
common sense).
As I have said, Sony itself sought to “strike a balance between a copyright
holder's legitimate demand for effective—not merely symbolic—protection of the
statutory monopoly, and the rights of others freely to engage in substantially
unrelated areas of commerce.” Id., at 442. Thus, to determine whether
modification, or a strict interpretation, of Sony is needed, I would ask whether MGM
has shown that Sony incorrectly balanced copyright and new-technology interests.
In particular: (1) Has Sony (as I interpret it) worked to protect new technology?
(2) If so, would modification or strict interpretation significantly weaken that
protection? (3) If so, would new or necessary copyright-related benefits outweigh
any such weakening?
A
The first question is the easiest to answer. Sony's rule, as I interpret it, has
provided entrepreneurs with needed assurance that they will be shielded from
copyright liability as they bring valuable new technologies to market.
Sony's rule is clear. That clarity allows those who develop new products that
are capable of substantial noninfringing uses to know, ex ante, that distribution of
their product will not yield massive monetary liability. At the same time, it helps
deter them from distributing products that have no other real function than-or that
are specifically intended for-copyright infringement, deterrence that the Court's
holding today reinforces (by adding a weapon to the copyright holder's legal
arsenal).
Sony's rule is strongly technology protecting. The rule deliberately makes it
difficult for courts to find secondary liability where new technology is at issue. It
establishes that the law will not impose copyright liability upon the distributors of
261
dual-use technologies (who do not themselves engage in unauthorized copying)
unless the product in question will be used almost exclusively to infringe copyrights
(or unless they actively induce infringements as we today describe). Sony thereby
recognizes that the copyright laws are not intended to discourage or to control the
emergence of new technologies, including (perhaps especially) those that help
disseminate information and ideas more broadly or more efficiently. Thus Sony's
rule shelters VCRs, typewriters, tape recorders, photocopiers, computers, cassette
players, compact disc burners, digital video recorders, MP3 players, Internet search
engines, and peer-to-peer software. But Sony's rule does not shelter descramblers,
even if one could theoretically use a descrambler in a noninfringing way. . . .
Sony's rule is forward looking. It does not confine its scope to a static
snapshot of a product's current uses (thereby threatening technologies that have
undeveloped future markets). Rather, as the VCR example makes clear, a
product's market can evolve dramatically over time. And Sony-by referring to a
capacity for substantial noninfringing uses-recognizes that fact. Sony's word
“capable” refers to a plausible, not simply a theoretical, likelihood that such uses
will come to pass, and that fact anchors Sony in practical reality. Cf. Aimster,
supra, at 651.
Sony's rule is mindful of the limitations facing judges where matters of
technology are concerned. Judges have no specialized technical ability to answer
questions about present or future technological feasibility or commercial viability
where technology professionals, engineers, and venture capitalists themselves may
radically disagree and where answers may differ depending upon whether one
focuses upon the time of product development or the time of distribution.
Consider, for example, the question whether devices can be added to Grokster's
software that will filter out infringing files. MGM tells us this is easy enough to do,
as do several amici that produce and sell the filtering technology. Grokster says it is
not at all easy to do, and not an efficient solution in any event, and several
apparently disinterested computer science professors agree. Which account should
a judge credit? Sony says that the judge will not necessarily have to decide.
Given the nature of the Sony rule, it is not surprising that in the last 20 years,
there have been relatively few contributory infringement suits-based on a product
distribution theory-brought against technology providers (a small handful of federal
appellate court cases and perhaps fewer than two dozen District Court cases in the
last 20 years). I have found nothing in the briefs or the record that shows that
Sony has failed to achieve its innovation-protecting objective.
B
The second, more difficult, question is whether a modified Sony rule (or a
strict interpretation) would significantly weaken the law's ability to protect new
technology. Justice Ginsburg's approach would require defendants to produce
considerably more concrete evidence-more than was presented here-to earn Sony's
shelter. That heavier evidentiary demand, and especially the more dramatic (caseby-case balancing) modifications that MGM and the Government seek, would, I
believe, undercut the protection that Sony now offers.
262
To require defendants to provide, for example, detailed evidence-say
business plans, profitability estimates, projected technological modifications, and so
forth-would doubtless make life easier for copyrightholder plaintiffs. But it would
simultaneously increase the legal uncertainty that surrounds the creation or
development of a new technology capable of being put to infringing uses.
Inventors and entrepreneurs (in the garage, the dorm room, the corporate lab, or
the boardroom) would have to fear (and in many cases endure) costly and
extensive trials when they create, produce, or distribute the sort of information
technology that can be used for copyright infringement. They would often be left
guessing as to how a court, upon later review of the product and its uses, would
decide when necessarily rough estimates amounted to sufficient evidence. They
would have no way to predict how courts would weigh the respective values of
infringing and noninfringing uses; determine the efficiency and advisability of
technological changes; or assess a product's potential future markets. The price of
a wrong guess-even if it involves a good-faith effort to assess technical and
commercial viability-could be large statutory damages (not less than $750 and up
to $30,000 per infringed work ). 17 U.S.C. § 504(c)(1). The additional risk and
uncertainty would mean a consequent additional chill of technological development.
C
The third question-whether a positive copyright impact would outweigh any
technology-related loss-I find the most difficult of the three. I do not doubt that a
more intrusive Sony test would generally provide greater revenue security for
copyright holders. But it is harder to conclude that the gains on the copyright
swings would exceed the losses on the technology roundabouts.
For one thing, the law disfavors equating the two different kinds of gain and
loss; rather, it leans in favor of protecting technology. As Sony itself makes clear,
the producer of a technology which permits unlawful copying does not himself
engage in unlawful copying-a fact that makes the attachment of copyright liability
to the creation, production, or distribution of the technology an exceptional thing.
See 464 U.S., at 431 (courts “must be circumspect” in construing the copyright
laws to preclude distribution of new technologies). Moreover, Sony has been the
law for some time. And that fact imposes a serious burden upon copyright holders
like MGM to show a need for change in the current rules of the game, including a
more strict interpretation of the test.
In any event, the evidence now available does not, in my view, make out a
sufficiently strong case for change. To say this is not to doubt the basic need to
protect copyrighted material from infringement. . . . But these highly general
principles cannot by themselves tell us how to balance the interests at issue in Sony
or whether Sony's standard needs modification. And at certain key points,
information is lacking.
Will an unmodified Sony lead to a significant diminution in the amount or
quality of creative work produced? Since copyright's basic objective is creation and
263
its revenue objectives but a means to that end, this is the underlying copyright
question. And its answer is far from clear.
Unauthorized copying likely diminishes industry revenue, though it is not clear by
how much. . . . .
The extent to which related production has actually and resultingly declined
remains uncertain, though there is good reason to believe that the decline, if any, is
not substantial. . . .
More importantly, copyright holders at least potentially have other tools
available to reduce piracy and to abate whatever threat it poses to creative
production. As today's opinion makes clear, a copyright holder may proceed
against a technology provider where a provable specific intent to infringe (of the
kind the Court describes) is present. Services like Grokster may well be liable under
an inducement theory.
In addition, a copyright holder has always had the legal authority to bring a
traditional infringement suit against one who wrongfully copies. Indeed, since
September 2003, the Recording Industry Association of America (RIAA) has filed
“thousands of suits against people for sharing copyrighted material.” [cit]. These
suits have provided copyright holders with damages; have served as a teaching
tool, making clear that much file sharing, if done without permission, is unlawful;
and apparently have had a real and significant deterrent effect. . . .
Further, copyright holders may develop new technological devices that will
help curb unlawful infringement. Some new technology, called “digital
‘watermarking’ ” and “digital fingerprint[ing],” can encode within the file
information about the author and the copyright scope and date, which “fingerprints”
can help to expose infringers. . .
At the same time, advances in technology have discouraged unlawful copying
by making lawful copying (e.g., downloading music with the copyright holder's
permission) cheaper and easier to achieve. Several services now sell music for less
than $1 per song. (Walmart.com, for example, charges $0.88 each).
Consequently, many consumers initially attracted to the convenience and flexibility
of services like Grokster are now migrating to lawful paid services (services with
copying permission) where they can enjoy at little cost even greater convenience
and flexibility without engaging in unlawful swapping. . . .
Thus, lawful music downloading services-those that charge the customer for
downloading music and pay royalties to the copyright holder-have continued to
grow and to produce substantial revenue. . . .And more advanced types of nonmusic-oriented P2P networks have also started to develop, drawing in part on the
lessons of Grokster.
Finally, as Sony recognized, the legislative option remains available. Courts
are less well suited than Congress to the task of “accommodat[ing] fully the varied
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permutations of competing interests that are inevitably implicated by such new
technology.” Sony, 464 U.S., at 431. . . .
I do not know whether these developments and similar alternatives will prove
sufficient, but I am reasonably certain that, given their existence, a strong
demonstrated need for modifying Sony (or for interpreting Sony's standard more
strictly) has not yet been shown. That fact, along with the added risks that
modification (or strict interpretation) would impose upon technological innovation,
leads me to the conclusion that we should maintain Sony, reading its standard as I
have read it. As so read, it requires affirmance of the Ninth Circuit's determination
of the relevant aspects of the Sony question.
***
For these reasons, I disagree with Justice Ginsburg, but I agree with the
Court and join its opinion.
The CARTOON NETWORK v. CSC HOLDINGS, INC.
536 F.3d 121 (2008)
JOHN M. WALKER, JR., Circuit Judge:
Defendant-Appellant Cablevision Systems Corporation (“Cablevision”) wants to
market a new “Remote Storage” Digital Video Recorder system (“RS-DVR”), using a
technology akin to both traditional, set-top digital video recorders, like TiVo
(“DVRs”), and the video-on-demand (“VOD”) services provided by many cable
companies. Plaintiffs-Appellees produce copyrighted movies and television
programs that they provide to Cablevision pursuant to numerous licensing
agreements. They contend that Cablevision, through the operation of its RS-DVR
system as proposed, would directly infringe their copyrights both by making
unauthorized reproductions, and by engaging in public performances, of their
copyrighted works. The material facts are not in dispute. Because we conclude that
Cablevision would not directly infringe plaintiffs' rights under the Copyright Act by
offering its RS-DVR system to consumers, we reverse the district court's award of
summary judgment to plaintiffs, and we vacate its injunction against Cablevision.
BACKGROUND
Today's television viewers increasingly use digital video recorders (“DVRs”) instead
of video cassette recorders (“VCRs”) to record television programs and play them
back later at their convenience. DVRs generally store recorded programming on an
internal hard drive rather than a cassette. But, as this case demonstrates, the
generic term “DVR” actually refers to a growing number of different devices and
systems. Companies like TiVo sell a stand-alone DVR device that is typically
connected to a user's cable box and television much like a VCR. Many cable
companies also lease to their subscribers “set-top storage DVRs,” which combine
many of the functions of a standard cable box and a stand-alone DVR in a single
device.
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In March 2006, Cablevision, an operator of cable television systems, announced the
advent of its new “Remote Storage DVR System.” As designed, the RS-DVR allows
Cablevision customers who do not have a stand-alone DVR to record cable
programming on central hard drives housed and maintained by Cablevision at a
“remote” location. RS-DVR customers may then receive playback of those programs
through their home television sets, using only a remote control and a standard
cable box equipped with the RS-DVR software. Cablevision notified its content
providers, including plaintiffs, of its plans to offer RS-DVR, but it did not seek any
license from them to operate or sell the RS-DVR.
Plaintiffs, which hold the copyrights to numerous movies and television programs,
sued Cablevision for declaratory and injunctive relief. They alleged that
Cablevision's proposed operation of the RS-DVR would directly infringe their
exclusive rights to both reproduce and publicly perform their copyrighted works.
Critically for our analysis here, plaintiffs alleged theories only of direct infringement,
not contributory infringement, and defendants waived any defense based on fair
use.
Ultimately, the United States District Court for the Southern District of New York
(Denny Chin, Judge), awarded summary judgment to the plaintiffs and enjoined
Cablevision from operating the RS-DVR system without licenses from its content
providers. See Twentieth Century Fox Film Corp. v. Cablevision Sys. Corp.
(Cablevision I), 478 F.Supp.2d 607 (S.D.N.Y.2007). At the outset, we think it
helpful to an understanding of our decision to describe, in greater detail, both the
RS-DVR and the district court's opinion.
I. Operation of the RS-DVR System
Cable companies like Cablevision aggregate television programming from a wide
variety of “content providers”-the various broadcast and cable channels that
produce or provide individual programs-and transmit those programs into the
homes of their subscribers via coaxial cable. At the outset of the transmission
process, Cablevision gathers the content of the various television channels into a
single stream of data. Generally, this stream is processed and transmitted to
Cablevision's customers in real time. Thus, if a Cartoon Network program is
scheduled to air Monday night at 8pm, Cartoon Network transmits that program's
data to Cablevision and other cable companies nationwide at that time, and the
cable companies immediately re-transmit the data to customers who subscribe to
that channel.
Under the new RS-DVR, this single stream of data is split into two streams. The
first is routed immediately to customers as before. The second stream flows into a
device called the Broadband Media Router (“BMR”), id. at 613, which buffers the
data stream, reformats it, and sends it to the “Arroyo Server,” which consists, in
relevant part, of two data buffers and a number of high-capacity hard disks. The
entire stream of data moves to the first buffer (the “primary ingest buffer”), at
which point the server automatically inquires as to whether any customers want to
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record any of that programming. If a customer has requested a particular program,
the data for that program move from the primary buffer into a secondary buffer,
and then onto a portion of one of the hard disks allocated to that customer. As new
data flow into the primary buffer, they overwrite a corresponding quantity of data
already on the buffer. The primary ingest buffer holds no more than 0.1 seconds of
each channel's programming at any moment. Thus, every tenth of a second, the
data residing on this buffer are automatically erased and replaced. The *125 data
buffer in the BMR holds no more than 1.2 seconds of programming at any time.
While buffering occurs at other points in the operation of the RS-DVR, only the BMR
buffer and the primary ingest buffer are utilized absent any request from an
individual subscriber.
As the district court observed, “the RS-DVR is not a single piece of equipment,” but
rather “a complex system requiring numerous computers, processes, networks of
cables, and facilities staffed by personnel twenty-four hours a day and seven days a
week.” Id. at 612. To the customer, however, the processes of recording and
playback on the RS-DVR are similar to that of a standard set-top DVR. Using a
remote control, the customer can record programming by selecting a program in
advance from an on-screen guide, or by pressing the record button while viewing a
given program. A customer cannot, however, record the earlier portion of a
program once it has begun. To begin playback, the customer selects the show from
an on-screen list of previously recorded programs. See id. at 614-16. The principal
difference in operation is that, instead of sending signals from the remote to an onset box, the viewer sends signals from the remote, through the cable, to the Arroyo
Server at Cablevision's central facility. See id. In this respect, RS-DVR more closely
resembles a VOD service, whereby a cable subscriber uses his remote and cable
box to request transmission of content, such as a movie, stored on computers at
the cable company's facility. Id. at 612. But unlike a VOD service, RS-DVR users
can only play content that they previously requested to be recorded.
Cablevision has some control over the content available for recording: a customer
can only record programs on the channels offered by Cablevision (assuming he
subscribes to them). Cablevision can also modify the system to limit the number of
channels available and considered doing so during development of the RS-DVR. Id.
at 613.
II. The District Court's Decision
In the district court, plaintiffs successfully argued that Cablevision's proposed
system would directly infringe their copyrights in three ways. First, by briefly
storing data in the primary ingest buffer and other data buffers integral to the
function of the RS-DVR, Cablevision would make copies of protected works and
thereby directly infringe plaintiffs' exclusive right of reproduction under the
Copyright Act. Second, by copying programs onto the Arroyo Server hard disks (the
“playback copies”), Cablevision would again directly infringe the reproduction right.
And third, by transmitting the data from the Arroyo Server hard disks to its RS-DVR
customers in response to a “playback” request, Cablevision would directly infringe
plaintiffs' exclusive right of public performance. See id. at 617. Agreeing with all
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three arguments, the district court awarded summary declaratory judgment to
plaintiffs and enjoined Cablevision from operating the RS-DVR system without
obtaining licenses from the plaintiff copyright holders.
As to the buffer data, the district court rejected defendants' arguments 1) that the
data were not “fixed” and therefore were not “copies” as defined in the Copyright
Act, and 2) that any buffer copying was de minimis because the buffers stored only
small amounts of data for very short periods of time. In rejecting the latter
argument, the district court noted that the “aggregate effect of the buffering” was
to reproduce the entirety of Cablevision's programming, and such copying “can
hardly be called de minimis.” Id. at 621.
On the issue of whether creation of the playback copies made Cablevision liable for
direct infringement, the parties and the district court agreed that the dispositive
question was “who makes the copies”? Id. at 617. Emphasizing Cablevision's
“unfettered discretion” over the content available for recording, its ownership and
maintenance of the RS-DVR components, and its “continuing relationship” with its
RS-DVR customers, the district court concluded that “the copying of programming
to the RS-DVR's Arroyo servers ... would be done not by the customer but by
Cablevision, albeit at the customer's request.” Id. at 618, 620, 621.
Finally, as to the public performance right, Cablevision conceded that, during the
playback, “the streaming of recorded programming in response to a customer's
request is a performance.” Id. at 622. Cablevision contended, however, that the
work was performed not by Cablevision, but by the customer, an argument the
district court rejected “for the same reasons that [it] reject [ed] the argument that
the customer is ‘doing’ the copying involved in the RS-DVR.” Id. Cablevision also
argued that such a playback transmission was not “to the public,” and therefore not
a public performance as defined in the Copyright Act, because it “emanates from a
distinct copy of a program uniquely associated with one customer's set-top box and
intended for that customer's exclusive viewing in his or her home.” Id. The district
court disagreed, noting that “Cablevision would transmit the same program to
members of the public, who may receive the performance at different times,
depending on whether they view the program in real time or at a later time as an
RS-DVR playback.” Id. at 623 (emphasis added). The district court also relied on a
case from the Northern District of California, On Command Video Corp. v. Columbia
Pictures Industries, 777 F.Supp. 787 (N.D.Cal.1991), which held that when the
relationship between the transmitter and the audience of a performance is
commercial, the transmission is “to the public,” see Cablevision I, 478 F.Supp.2d at
623 (citing On Command, 777 F.Supp. at 790).
Finding that the operation of the RS-DVR would infringe plaintiffs' copyrights, the
district court awarded summary judgment to plaintiffs and enjoined Cablevision
from copying or publicly performing plaintiffs' copyrighted works “in connection with
its proposed RS-DVR system,” unless it obtained the necessary licenses.
Cablevision I, 478 F.Supp.2d at 624. Cablevision appealed.
DISCUSSION
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We review a district court's grant of summary judgment de novo. Bill Graham
Archives v. Dorling Kindersley Ltd., 448 F.3d 605, 607 (2d Cir.2006).
“Section 106 of the Copyright Act grants copyright holders a bundle of exclusive
rights....” Id. at 607-08. This case implicates two of those rights: the right “to
reproduce the copyrighted work in copies,” and the right “to perform the
copyrighted work publicly.” 17 U.S.C. § 106(1), (4). As discussed above, the district
court found that Cablevision infringed the first right by 1) buffering the data from
its programming stream and 2) copying content onto the Arroyo Server hard disks
to enable playback of a program requested by an RS-DVR customer. In addition,
the district court found that Cablevision would infringe the public performance right
by transmitting a program to an RS-DVR customer in response to that customer's
playback request. We address each of these three allegedly infringing acts in turn.
I. The Buffer Data
It is undisputed that Cablevision, not any customer or other entity, takes the
content from one stream of programming, after the split, and stores it, one small
piece at a time, in the BMR buffer and the primary ingest buffer. As a result, the
information is buffered before any customer requests a recording, and would be
buffered even if no such request were made. The question is whether, by buffering
the data that make up a given work, Cablevision “reproduce[s]” that work “in
copies,” 17 U.S.C. § 106(1), and thereby infringes the copyright holder's
reproduction right.
[1] “Copies,” as defined in the Copyright Act, “are material objects ... in which a
work is fixed by any method ... and from which the work can be ... reproduced.” Id.
§ 101. The Act also provides that a work is “ ‘fixed’ in a tangible medium of
expression when its embodiment ... is sufficiently permanent or stable to permit it
to be ... reproduced ... for a period of more than transitory duration.” Id. (emphasis
added). We believe that this language plainly imposes two distinct but related
requirements: the work must be embodied in a medium, i.e., placed in a medium
such that it can be perceived, reproduced, etc., from that medium (the
“embodiment requirement”), and it must remain thus embodied “for a period of
more than transitory duration” (the “duration requirement”). See 2 Melville B.
Nimmer & David Nimmer, Nimmer on Copyright § 8.02[B][3], at 8-32 (2007).
Unless both requirements are met, the work is not “fixed” in the buffer, and, as a
result, the buffer data is not a “copy” of the original work whose data is buffered.
The district court mistakenly limited its analysis primarily to the embodiment
requirement. As a result of this error, once it determined that the buffer data was
“[c]learly ... capable of being reproduced,” i.e., that the work was embodied in the
buffer, the district court concluded that the work was therefore “fixed” in the buffer,
and that a copy had thus been made. Cablevision I, 478 F.Supp.2d at 621-22. In
doing so, it relied on a line of cases beginning with MAI Systems Corp. v. Peak
Computer Inc., 991 F.2d 511 (9th Cir.1993). It also relied on the United States
Copyright Office's 2001 report on the Digital Millennium Copyright Act, which
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states, in essence, that an embodiment is fixed “[u]nless a reproduction manifests
itself so fleetingly that it cannot be copied.” U.S. Copyright Office, DMCA Section
104 Report 111 (Aug.2001) (“DMCA Report ”) (emphasis added), available at
http:// www. copyright. gov/ reports/ studies/ dmca/ sec- 104- report- vol- 1. pdf.
The district court's reliance on cases like MAI Systems is misplaced. In general,
those cases conclude that an alleged copy is fixed without addressing the duration
requirement; it does not follow, however, that those cases assume, much less
establish, that such a requirement does not exist. Indeed, the duration
requirement, by itself, was not at issue in MAI Systems and its progeny. As a
result, they do not speak to the issues squarely before us here: If a work is only
“embodied” in a medium for a period of transitory duration, can it be “fixed” in that
medium, and thus a copy? And what constitutes a period “of more than transitory
duration”?
In MAI Systems, defendant Peak Computer, Inc., performed maintenance and
repairs on computers made and sold by MAI Systems. In order to service a
customer's computer, a Peak employee had to operate the computer and run the
computer's copyrighted operating system software. See MAI Sys., 991 F.2d at 513.
The issue in MAI Systems was whether, by loading the software into the computer's
RAM,FN1 the repairman created a “copy” as defined in § 101. See id. at 517. The
resolution of this issue turned on whether the software's embodiment in the
computer's RAM was “fixed,” within the meaning of the same section. The Ninth
Circuit concluded that
FN1. To run a computer program, the data representing that program must
be transferred from a data storage medium (such as a floppy disk or a hard
drive) to a form of Random Access Memory (“RAM”) where the data can be
processed. The data buffers at issue here are also a form of RAM.
by showing that Peak loads the software into the RAM and is then able to view the
system error log and diagnose the problem with the computer, MAI has
adequately shown that the representation created in the RAM is “sufficiently
permanent or stable to permit it to be perceived, reproduced, or otherwise
communicated for a period of more than transitory duration.”
Id. at 518 (quoting 17 U.S.C. § 101).
The MAI Systems court referenced the “transitory duration” language but did not
discuss or analyze it. The opinion notes that the defendants “vigorously” argued
that the program's embodiment in the RAM was not a copy, but it does not specify
the arguments defendants made. Id. at 517. This omission suggests that the
parties did not litigate the significance of the “transitory duration” language, and
the court therefore had no occasion to address it. This is unsurprising, because it
seems fair to assume that in these cases the program was embodied in the RAM for
at least several minutes.
Accordingly, we construe MAI Systems and its progeny as holding that loading a
program into a computer's RAM can result in copying that program. We do not read
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MAI Systems as holding that, as a matter of law, loading a program into a form of
RAM always results in copying. Such a holding would read the “transitory duration”
language out of the definition, and we do not believe our sister circuit would dismiss
this statutory language without even discussing it. It appears the parties in MAI
Systems simply did not dispute that the duration requirement was satisfied; this
line of cases simply concludes that when a program is loaded into RAM, the
embodiment requirement is satisfied-an important holding in itself, and one we see
no reason to quibble with here.
At least one court, relying on MAI Systems in a highly similar factual setting, has
made this point explicitly. In Advanced Computer Services of Michigan, Inc. v. MAI
Systems Corp., the district court expressly noted that the unlicensed user in that
case ran copyrighted diagnostic software “for minutes or longer,” but that the
program's embodiment in the computer's RAM might be too ephemeral to be fixed
if the computer had been shut down “within seconds or fractions of a second” after
loading the copyrighted program. 845 F.Supp. 356, 363 (E.D.Va.1994). We have no
quarrel with this reasoning; it merely makes explicit the reasoning that is implicit in
the other MAI Systems cases. Accordingly, those cases provide no support for the
conclusion that the definition of “fixed” does not include a duration requirement.
See Webster v. Fall, 266 U.S. 507, 511, 45 S.Ct. 148, 69 L.Ed. 411 (1924)
(“Questions which merely lurk in the record, neither brought to the attention of the
court nor ruled upon, are not to be considered as having been so decided as to
constitute precedents.”).
Nor does the Copyright Office's 2001 DMCA Report, also relied on by the district
court in this case, explicitly suggest that the definition of “fixed” does not contain a
duration requirement. However, as noted above, it does suggest that an
embodiment is fixed “[u]nless a reproduction manifests itself so fleetingly that it
cannot be copied, perceived or communicated.” DMCA Report, supra, at 111. As we
have stated, to determine whether a work is “fixed” in a given medium, the
statutory language directs us to ask not only 1) whether a work is “embodied” in
that medium, but also 2) whether it is embodied in the medium “for a period of
more than transitory duration.” According to the Copyright Office, if the work is
capable of being copied from that medium for any amount of time, the answer to
both questions is “yes.” The problem with this interpretation is that it reads the
“transitory duration” language out of the statute.
We assume, as the parties do, that the Copyright Office's pronouncement deserves
only Skidmore deference, deference based on its “power to persuade.” Skidmore v.
Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944). And because
the Office's interpretation does not explain why Congress would include language in
a definition if it intended courts to ignore that language, we are not persuaded.
In sum, no case law or other authority dissuades us from concluding that the
definition of “fixed” imposes both an embodiment requirement and a duration
requirement. Accord CoStar Group Inc. v. LoopNet, Inc., 373 F.3d 544, 551 (4th
Cir.2004) (while temporary reproductions “may be made in this transmission
process, they would appear not to be ‘fixed’ in the sense that they are ‘of more
271
than transitory duration’ ”). We now turn to whether, in this case, those
requirements are met by the buffer data.
Cablevision does not seriously dispute that copyrighted works are “embodied” in the
buffer. Data in the BMR buffer can be reformatted and transmitted to the other
components of the RS-DVR system. Data in the primary ingest buffer can be copied
onto the Arroyo hard disks if a user has requested a recording of that data. Thus, a
work's “embodiment” in either buffer “is sufficiently permanent or stable to permit
it to be perceived, reproduced,” (as in the case of the ingest buffer) “or otherwise
communicated” (as in the BMR buffer). 17 U.S.C. § 101. The result might be
different if only a single second of a much longer work was placed in the buffer in
isolation. In such a situation, it might be reasonable to conclude that only a
minuscule portion of a work, rather than “a work” was embodied in the buffer.
Here, however, where every second of an entire work is placed, one second at a
time, in the buffer, we conclude that the work is embodied in the buffer.
Does any such embodiment last “for a period of more than transitory duration”? Id.
No bit of data remains in any buffer for more than a fleeting 1.2 seconds. And
unlike the data in cases like MAI Systems, which remained embodied in the
computer's RAM memory until the user turned the computer off, each bit of data
here is rapidly and automatically overwritten as soon as it is processed. While our
inquiry is necessarily fact-specific, and other factors not present here may alter the
duration analysis significantly, these facts strongly suggest that the works in this
case are embodied in the buffer for only a “transitory” period, thus failing the
duration requirement.
Against this evidence, plaintiffs argue only that the duration is not transitory
because the data persist “long enough for Cablevision to make reproductions from
them.” Br. of Pls.-Appellees the Cartoon Network et al. at 51. As we have explained
above, however, this reasoning impermissibly reads the duration language out of
the statute, and we reject it. Given that the data reside in no buffer for more than
1.2 seconds before being automatically overwritten, and in the absence of
compelling arguments to the contrary, we believe that the copyrighted works here
are not “embodied” in the buffers for a period of more than transitory duration, and
are therefore not “fixed” in the buffers. Accordingly, the acts of buffering in the
operation of the RS-DVR do not create copies, as the Copyright Act defines that
term. Our resolution of this issue renders it unnecessary for us to determine
whether any copies produced by buffering data would be de minimis, and we
express no opinion on that question.
II. Direct Liability for Creating the Playback Copies
In most copyright disputes, the allegedly infringing act and the identity of the
infringer are never in doubt. These cases turn on whether the conduct in question
does, in fact, infringe the plaintiff's copyright. In this case, however, the core of the
dispute is over the authorship of the infringing conduct. After an RS-DVR subscriber
selects a program to record, and that program airs, a copy of the program-a
copyrighted work-resides on the hard disks of Cablevision's Arroyo Server, its
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creation unauthorized by the copyright holder. The question is who made this copy.
If it is Cablevision, plaintiffs' theory of direct infringement succeeds; if it is the
customer, plaintiffs' theory fails because Cablevision would then face, at most,
secondary liability, a theory of liability expressly disavowed by plaintiffs.
Few cases examine the line between direct and contributory liability. Both parties
cite a line of cases beginning with Religious Technology Center v. Netcom On-Line
Communication Services, 907 F.Supp. 1361 (N.D.Cal.1995). In Netcom, a thirdparty customer of the defendant Internet service provider (“ISP”) posted a
copyrighted work that was automatically reproduced by the defendant's computer.
The district court refused to impose direct liability on the ISP, reasoning that
“[a]lthough copyright is a strict liability statute, there should still be some element
of volition or causation which is lacking where a defendant's system is merely used
to create a copy by a third party.” Id. at 1370. Recently, the Fourth Circuit
endorsed the Netcom decision, noting that
to establish direct liability under ... the Act, something more must be shown than
mere ownership of a machine used by others to make illegal copies. There must
be actual infringing conduct with a nexus sufficiently close and causal to the illegal
copying that one could conclude that the machine owner himself trespassed on
the exclusive domain of the copyright owner.”
CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544, 550 (4th Cir.2004).
Here, the district court pigeon-holed the conclusions reached in Netcom and its
progeny as “premised on the unique attributes of the Internet.” Cablevision I, 478
F.Supp.2d at 620. While the Netcom court was plainly concerned with a theory of
direct liability that would effectively “hold the entire Internet liable” for the conduct
of a single user, 907 F.Supp. at 1372, its reasoning and conclusions, consistent
with precedents of this court and the Supreme Court, and with the text of the
Copyright Act, transcend the Internet. Like the Fourth Circuit, we reject the
contention that “the Netcom decision was driven by expedience and that its holding
is inconsistent with the established law of copyright,” CoStar, 373 F.3d at 549, and
we find it “a particularly rational interpretation of § 106,” id. at 551, rather than a
special-purpose rule applicable only to ISPs.
When there is a dispute as to the author of an allegedly infringing instance of
reproduction, Netcom and its progeny direct our attention to the volitional conduct
that causes the copy to be made. There are only two instances of volitional conduct
in this case: Cablevision's conduct in designing, housing, and maintaining a system
that exists only to produce a copy, and a customer's conduct in ordering that
system to produce a copy of a specific program. In the case of a VCR, it seems
clear-and we know of no case holding otherwise-that the operator of the VCR, the
person who actually presses the button to make the recording, supplies the
necessary element of volition, not the person who manufactures, maintains, or, if
distinct from the operator, owns the machine. We do not believe that an RS-DVR
customer is sufficiently distinguishable from a VCR user to impose liability as a
direct infringer on a different party for copies that are made automatically upon
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that customer's command.
The district court emphasized the fact that copying is “instrumental” rather than
“incidental” to the function of the RS-DVR system. Cablevision I, 478 F.Supp.2d at
620. While that may distinguish the RS-DVR from the ISPs in Netcom and CoStar, it
does not distinguish the RS-DVR from a VCR, a photocopier, or even a typical copy
shop. And the parties do not seem to contest that a company that merely makes
photocopiers available to the public on its premises, without more, is not subject to
liability for direct infringement for reproductions made by customers using those
copiers. They only dispute whether Cablevision is similarly situated to such a
proprietor.
The district court found Cablevision analogous to a copy shop that makes course
packs for college professors. In the leading case involving such a shop, for
example, “[t]he professor [gave] the copyshop the materials of which the
coursepack [was] to be made up, and the copyshop [did] the rest.” Princeton Univ.
Press v. Mich. Document Servs., 99 F.3d 1381, 1384 (6th Cir.1996) (en banc).
There did not appear to be any serious dispute in that case that the shop itself was
directly liable for reproducing copyrighted works. The district court here found that
Cablevision, like this copy shop, would be “doing” the copying, albeit “at the
customer's behest.” Cablevision I, 478 F.Supp.2d at 620.
But because volitional conduct is an important element of direct liability, the district
court's analogy is flawed. In determining who actually “makes” a copy, a significant
difference exists between making a request to a human employee, who then
volitionally operates the copying system to make the copy, and issuing a command
directly to a system, which automatically obeys commands and engages in no
volitional conduct. In cases like Princeton University Press, the defendants operated
a copying device and sold the product they made using that device. See 99 F.3d at
1383 (“The corporate defendant ... is a commercial copyshop that reproduced
substantial segments of copyrighted works of scholarship, bound the copies into
‘coursepacks,’ and sold the coursepacks to students....”). Here, by selling access to
a system that automatically produces copies on command, Cablevision more closely
resembles a store proprietor who charges customers to use a photocopier on his
premises, and it seems incorrect to say, without more, that such a proprietor
“makes” any copies when his machines are actually operated by his customers. See
Netcom, 907 F.Supp. at 1369. Some courts have held to the contrary, but they do
not explicitly explain why, and we find them unpersuasive. See, e.g., Elektra
Records Co. v. Gem Elec. Distribs., Inc., 360 F.Supp. 821, 823 (E.D.N.Y.1973)
(concluding that, “regardless” of whether customers or defendants' employees
operated the tape-copying machines at defendants' stores, defendant had actively
infringed copyrights).
The district court also emphasized Cablevision's “unfettered discretion in selecting
the programming that it would make available for recording.” Cablevision I, 478
F.Supp.2d at 620. This conduct is indeed more proximate to the creation of illegal
copying than, say, operating an ISP or opening a copy shop, where all copied
content was supplied by the customers themselves or other third parties.
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Nonetheless, we do not think it sufficiently proximate to the copying to displace the
customer as the person who “makes” the copies when determining liability under
the Copyright Act. Cablevision, we note, also has subscribers who use home VCRs
or DVRs (like TiVo), and has significant control over the content recorded by these
customers. But this control is limited to the channels of programming available to a
customer and not to the programs themselves. Cablevision has no control over
what programs are made available on individual channels or when those programs
will air, if at all. In this respect, Cablevision possesses far less control over
recordable content than it does in the VOD context, where it actively selects and
makes available beforehand the individual programs available for viewing. For these
reasons, we are not inclined to say that Cablevision, rather than the user, “does”
the copying produced by the RS-DVR system. As a result, we find that the district
court erred in concluding that Cablevision, rather than its RS-DVR customers,
makes the copies carried out by the RS-DVR system.
Our refusal to find Cablevision directly liable on these facts is buttressed by the
existence and contours of the Supreme Court's doctrine of contributory liability in
the copyright context. After all, the purpose of any causation-based liability doctrine
is to identify the actor (or actors) whose “conduct has been so significant and
important a cause that [he or she] should be legally responsible.” W. Page Keeton
et al., Prosser and Keeton on Torts § 42, at 273 (5th ed.1984). But here, to the
extent that we may construe the boundaries of direct liability more narrowly, the
doctrine of contributory liability stands ready to provide adequate protection to
copyrighted works.
Most of the facts found dispositive by the district court-e.g., Cablevision's
“continuing relationship” with its RS-DVR customers, its control over recordable
content, and the “instrumental[ity]” of copying to the RS-DVR system, Cablevision
I, 478 F.Supp.2d at 618-20-seem to us more relevant to the question of
contributory liability. In Sony Corp. of America v. Universal City Studios, Inc., the
lack of an “ongoing relationship” between Sony and its VCR customers supported
the Court's conclusion that it should not impose contributory liability on Sony for
any infringing copying done by Sony VCR owners. 464 U.S. 417, 437-38, 104 S.Ct.
774, 78 L.Ed.2d 574 (1984). The Sony Court did deem it “just” to impose liability
on a party in a “position to control” the infringing uses of another, but as a
contributory, not direct, infringer. Id. at 437, 104 S.Ct. 774. And asking whether
copying copyrighted material is only “incidental” to a given technology is akin to
asking whether that technology has “commercially significant noninfringing uses,”
another inquiry the Sony Court found relevant to whether imposing contributory
liability was just. Id. at 442, 104 S.Ct. 774.
The Supreme Court's desire to maintain a meaningful distinction between direct and
contributory copyright infringement is consistent with congressional intent. The
Patent Act, unlike the Copyright Act, expressly provides that someone who “actively
induces infringement of a patent” is “liable as an infringer,” 35 U.S.C. § 271(b), just
like someone who commits the underlying infringing act by “us[ing]” a patented
invention without authorization, id. § 271(a). In contrast, someone who merely
“sells ... a material or apparatus for use in practicing a patented process” faces only
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liability as a “contributory infringer.” Id. § 271(c). If Congress had meant to assign
direct liability to both the person who actually commits a copyright-infringing act
and any person who actively induces that infringement, the Patent Act tells us that
it knew how to draft a statute that would have this effect. Because Congress did not
do so, the Sony Court concluded that “[t]he Copyright Act does not expressly
render anyone liable for infringement committed by another.” 464 U.S. at 434, 104
S.Ct. 774. Furthermore, in cases like Sony, the Supreme Court has strongly
signaled its intent to use the doctrine of contributory infringement, not direct
infringement, to “identify[ ] the circumstances in which it is just to hold one
individual accountable for the actions of another.” Id. at 435, 104 S.Ct. 774. Thus,
although Sony warns us that “the lines between direct infringement, contributory
infringement, and vicarious liability are not clearly drawn,” id. at 435 n. 17, 104
S.Ct. 774 (internal quotation marks and citation omitted), that decision does not
absolve us of our duty to discern where that line falls in cases, like this one, that
require us to decide the question.
The district court apparently concluded that Cablevision's operation of the RS-DVR
system would contribute in such a major way to the copying done by another that it
made sense to say that Cablevision was a direct infringer, and thus, in effect, was
“doing” the relevant copying. There are certainly other cases, not binding on us,
that follow this approach. See, e.g., Playboy Enters. v. Russ Hardenburgh, Inc., 982
F.Supp. 503, 513 (N.D.Ohio 1997) (noting that defendant ISP's encouragement of
its users to copy protected files was “crucial” to finding that it was a direct
infringer). We need not decide today whether one's contribution to the creation of
an infringing copy may be so great that it warrants holding that party directly liable
for the infringement, even though another party has actually made the copy. We
conclude only that on the facts of this case, copies produced by the RS-DVR system
are “made” by the RS-DVR customer, and Cablevision's contribution to this
reproduction by providing the system does not warrant the imposition of direct
liability. Therefore, Cablevision is entitled to summary judgment on this point, and
the district court erred in awarding summary judgment to plaintiffs.
III. Transmission of RS-DVR Playback
Plaintiffs' final theory is that Cablevision will violate the Copyright Act by engaging
in unauthorized public performances of their works through the playback of the RSDVR copies. The Act grants a copyright owner the exclusive right, “in the case of ...
motion pictures and other audiovisual works, to perform the copyrighted work
publicly.” 17 U.S.C. § 106(4). Section 101, the definitional section of the Act,
explains that
[t]o perform or display a work “publicly” means (1) to perform or display it at a
place open to the public or at any place where a substantial number of persons
outside of a normal circle of a family and its social acquaintances is gathered; or
(2) to transmit or otherwise communicate a performance or display of the work to
a place specified by clause (1) or to the public, by means of any device or
process, whether the members of the public capable of receiving the performance
or display receive it in the same place or in separate places and at the same time
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or at different times.
Id. § 101.
The parties agree that this case does not implicate clause (1). Accordingly, we ask
whether these facts satisfy the second, “transmit clause” of the public performance
definition: Does Cablevision “transmit ... a performance ... of the work ... to the
public”? Id. No one disputes that the RS-DVR playback results in the transmission
of a performance of a work-the transmission from the Arroyo Server to the
customer's television set. Cablevision contends that (1) the RS-DVR customer,
rather than Cablevision, does the transmitting and thus the performing and (2) the
transmission is not “to the public” under the transmit clause.
As to Cablevision's first argument, we note that our conclusion in Part II that the
customer, not Cablevision, “does” the copying does not dictate a parallel conclusion
that the customer, and not Cablevision, “performs” the copyrighted work. The
definitions that delineate the contours of the reproduction and public performance
rights vary in significant ways. For example, the statute defines the verb “perform”
and the noun “copies,” but not the verbs “reproduce” or “copy.” Id. We need not
address Cablevision's first argument further because, even if we assume that
Cablevision makes the transmission when an RS-DVR playback occurs, we find that
the RS-DVR playback, as described here, does not involve the transmission of a
performance “to the public.”
The statute itself does not expressly define the term “performance” or the phrase
“to the public.” It does explain that a transmission may be “to the public ... whether
the members of the public capable of receiving the performance ... receive it in the
same place or in separate places and at the same time or at different times.” Id.
This plain language instructs us that, in determining whether a transmission is “to
the public,” it is of no moment that the potential recipients of the transmission are
in different places, or that they may receive the transmission at different times. The
implication from this same language, however, is that it is relevant, in determining
whether a transmission is made to the public, to discern who is “capable of
receiving” the performance being transmitted. The fact that the statute says
“capable of receiving the performance,” instead of “capable of receiving the
transmission,” underscores the fact that a transmission of a performance is itself a
performance. Cf. Buck v. Jewell-La Salle Realty Co., 283 U.S. 191, 197-98, 51 S.Ct.
410, 75 L.Ed. 971 (1931).
The legislative history of the transmit clause supports this interpretation. The House
Report on the 1976 Copyright Act states that
[u]nder the bill, as under the present law, a performance made available by
transmission to the public at large is “public” even though the recipients are not
gathered in a single place, and even if there is no proof that any of the potential
recipients was operating his receiving apparatus at the time of the transmission.
The same principles apply whenever the potential recipients of the transmission
represent a limited segment of the public, such as the occupants of hotel rooms or
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the subscribers of a cable television service.
H.R.Rep. No. 94-1476, at 64-65 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5678
(emphases added).
Plaintiffs also reference a 1967 House Report, issued nearly a decade before the Act
we are interpreting, stating that the same principles apply where the transmission
is “capable of reaching different recipients at different times, as in the case of
sounds or images stored in an information system and capable of being performed
or displayed at the initiative of individual members of the public.” H.R.Rep. No. 9083, at 29 (1967) (emphases added). We question how much deference this report
deserves. But we need not belabor the point here, as the 1967 report is consistent
with both legislative history contemporaneous with the Act's passage and our own
interpretation of the statute's plain meaning.
From the foregoing, it is evident that the transmit clause directs us to examine who
precisely is “capable of receiving” a particular transmission of a performance.
Cablevision argues that, because each RS-DVR transmission is made using a single
unique copy of a work, made by an individual subscriber, one that can be decoded
exclusively by that subscriber's cable box, only one subscriber is capable of
receiving any given RS-DVR transmission. This argument accords with the language
of the transmit clause, which, as described above, directs us to consider the
potential audience of a given transmission. We are unpersuaded by the district
court's reasoning and the plaintiffs' arguments that we should consider a larger
potential audience in determining whether a transmission is “to the public.”
The district court, in deciding whether the RS-DVR playback of a program to a
particular customer is “to the public,” apparently considered all of Cablevision's
customers who subscribe to the channel airing that program and all of Cablevision's
RS-DVR subscribers who request a copy of that program. Thus, it concluded that
the RS-DVR playbacks constituted public performances because “Cablevision would
transmit the same program to members of the public, who may receive the
performance at different times, depending on whether they view the program in
real time or at a later time as an RS-DVR playback.” Cablevision I, 478 F.Supp.2d
at 623 (emphasis added). In essence, the district court suggested that, in
considering whether a transmission is “to the public,” we consider not the potential
audience of a particular transmission, but the potential audience of the underlying
work (i.e., “the program”) whose content is being transmitted.
We cannot reconcile the district court's approach with the language of the transmit
clause. That clause speaks of people capable of receiving a particular “transmission”
or “performance,” and not of the potential audience of a particular “work.” Indeed,
such an approach would render the “to the public” language surplusage. Doubtless
the potential audience for every copyrighted audiovisual work is the general public.
As a result, any transmission of the content of a copyrighted work would constitute
a public performance under the district court's interpretation. But the transmit
clause obviously contemplates the existence of non-public transmissions; if it did
not, Congress would have stopped drafting that clause after “performance.”
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On appeal, plaintiffs offer a slight variation of this interpretation. They argue that
both in its real-time cablecast and via the RS-DVR playback, Cablevision is in fact
transmitting the “same performance” of a given work: the performance of the work
that occurs when the programming service supplying Cablevision's content
transmits that content to Cablevision and the service's other licensees. See Br. of
Pls.-Appellees Twentieth Century Fox Film Corp. et al. at 27 (“Fox Br.”) (“The
critical factor ... is that the same performance is transmitted to different subscribers
at different times .... more specifically, the performance of that program by HBO or
another programming service.” (third emphasis added)).
Thus, according to plaintiffs, when Congress says that to perform a work publicly
means to transmit ... a performance ... to the public, they really meant “transmit ...
the ‘original performance’ ... to the public.” The implication of this theory is that to
determine whether a given transmission of a performance is “to the public,” we
would consider not only the potential audience of that transmission, but also the
potential audience of any transmission of the same underlying “original”
performance.
Like the district court's interpretation, this view obviates any possibility of a purely
private transmission. Furthermore, it makes Cablevision's liability depend, in part,
on the actions of legal strangers. Assume that HBO transmits a copyrighted work to
both Cablevision and Comcast. Cablevision merely retransmits the work from one
Cablevision facility to another, while Comcast retransmits the program to its
subscribers. Under plaintiffs' interpretation, Cablevision would still be transmitting
the performance to the public, solely because Comcast has transmitted the same
underlying performance to the public. Similarly, a hapless customer who records a
program in his den and later transmits the recording to a television in his bedroom
would be liable for publicly performing the work simply because some other party
had once transmitted the same underlying performance to the public.
We do not believe Congress intended such odd results. Although the transmit
clause is not a model of clarity, we believe that when Congress speaks of
transmitting a performance to the public, it refers to the performance created by
the act of transmission. Thus, HBO transmits its own performance of a work when it
transmits to Cablevision, and Cablevision transmits its own performance of the
same work when it retransmits the feed from HBO.
Furthermore, we believe it would be inconsistent with our own transmit clause
jurisprudence to consider the potential audience of an upstream transmission by a
third party when determining whether a defendant's own subsequent transmission
of a performance is “to the public.” In National Football League v. PrimeTime 24
Joint Venture (NFL), 211 F.3d 10 (2000), we examined the transmit clause in the
context of satellite television provider PrimeTime, which captured protected content
in the United States from the NFL, transmitted it from the United States to a
satellite (“the uplink”), and then transmitted it from the satellite to subscribers in
both the United States and Canada (“the downlink”). PrimeTime had a license to
transmit to its U.S. customers, but not its Canadian customers. It argued that
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although the downlink transmission to its Canadian subscribers was a public
performance, it could not be held liable for that act because it occurred entirely
outside of the United States and therefore was not subject to the strictures of the
Copyright Act. It also argued that the uplink transmission was not a public
performance because it was a transmission to a single satellite. See id. at 12.
The NFL court did not question the first assumption, but it flatly rejected the second
on a specific and germane ground:
We believe the most logical interpretation of the Copyright Act is to hold that a
public performance or display includes each step in the process by which a
protected work wends its way to its audience. Under that analysis, it is clear that
PrimeTime's uplink transmission of signals captured in the United States is a step
in the process by which NFL's protected work wends its way to a public audience.
Id. at 13 (emphasis added) (internal quotation and citation omitted). Thus, while
the uplink transmission that took place in the United States was not, in itself, “to
the public,” the NFL court deemed it so because it ultimately resulted in an
undisputed public performance. Notably, the NFL court did not base its decision on
the fact that an upstream transmission by another party (the NFL) might have been
to the public. Nor did the court base its decision on the fact that Primetime
simultaneously transmitted a performance of the work to the public in the United
States. Because NFL directs us to look downstream, rather than upstream or
laterally, to determine whether any link in a chain of transmissions made by a party
constitutes a public performance, we reject plaintiffs' contention that we examine
the potential recipients of the content provider's initial transmission to determine
who is capable of receiving the RS-DVR playback transmission.
Plaintiffs also rely on NFL for the proposition that Cablevision publicly performs a
work when it splits its programming stream and transmits the second stream to the
RS-DVR system. Because NFL only supports that conclusion if we determine that
the final transmission in the chain (i.e., the RS-DVR playback transmission) is “to
the public,” plaintiffs' reliance on NFL is misplaced. NFL dealt with a chain of
transmissions whose final link was undisputedly a public performance. It therefore
does not guide our current inquiry.
In sum, none of the arguments advanced by plaintiffs or the district court alters our
conclusion that, under the transmit clause, we must examine the potential audience
of a given transmission by an alleged infringer to determine whether that
transmission is “to the public.” And because the RS-DVR system, as designed, only
makes transmissions to one subscriber using a copy made by that subscriber, we
believe that the universe of people capable of receiving an RS-DVR transmission is
the single subscriber whose self-made copy is used to create that transmission.
Plaintiffs contend that it is “wholly irrelevant, in determining the existence of a
public performance, whether ‘unique’ copies of the same work are used to make the
transmissions.” Fox Br. at 27. But plaintiffs cite no authority for this contention.
And our analysis of the transmit clause suggests that, in general, any factor that
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limits the potential audience of a transmission is relevant.
Furthermore, no transmission of an audiovisual work can be made, we assume,
without using a copy of that work: to transmit a performance of a movie, for
example, the transmitter generally must obtain a copy of that movie. As a result, in
the context of movies, television programs, and other audiovisual works, the right
of reproduction can reinforce and protect the right of public performance. If the
owner of a copyright believes he is injured by a particular transmission of a
performance of his work, he may be able to seek redress not only for the infringing
transmission, but also for the underlying copying that facilitated the transmission.
Given this interplay between the various rights in this context, it seems quite
consistent with the Act to treat a transmission made using Copy A as distinct from
one made using Copy B, just as we would treat a transmission made by Cablevision
as distinct from an otherwise identical transmission made by Comcast. Both factorsthe identity of the transmitter and the source material of the transmission-limit the
potential audience of a transmission in this case and are therefore germane in
determining whether that transmission is made “to the public.”
Indeed, we believe that Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749
F.2d 154 (3d Cir.1984), relied on by both plaintiffs and the district court, supports
our decision to accord significance to the existence and use of distinct copies in our
transmit clause analysis. In that case, defendant operated a video rental store,
Maxwell's, which also housed a number of small private booths containing seats and
a television. Patrons would select a film, enter the booth, and close the door. An
employee would then load a copy of the requested movie into a bank of VCRs at the
front of the store and push play, thereby transmitting the content of the tape to the
television in the viewing booth. See id. at 156-57.
The Third Circuit found that defendants' conduct constituted a public performance
under both clauses of the statutory definition. In concluding that Maxwell's violated
the transmit clause, that court explicitly relied on the fact that defendants showed
the same copy of a work seriatim to its clientele, and it quoted a treatise
emphasizing the same fact:
Professor Nimmer's examination of this definition is particularly pertinent: “if the
same copy ... of a given work is repeatedly played (i.e., ‘performed’) by different
members of the public, albeit at different times, this constitutes a ‘public’
performance.” 2 M. Nimmer, § 8.14[C][3], at 8-142 (emphasis in original)....
Although Maxwell's has only one copy of each film, it shows each copy repeatedly
to different members of the public. This constitutes a public performance.
Id. at 159 (first omission in original).
Unfortunately, neither the Redd Horne court nor Prof. Nimmer explicitly explains
why the use of a distinct copy affects the transmit clause inquiry. But our
independent analysis confirms the soundness of their intuition: the use of a unique
copy may limit the potential audience of a transmission and is therefore relevant to
whether that transmission is made “to the public.” Plaintiffs' unsupported
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arguments to the contrary are unavailing.
Given that each RS-DVR transmission is made to a given subscriber using a copy
made by that subscriber, we conclude that such a transmission is not “to the
public,” without analyzing the contours of that phrase in great detail. No authority
cited by the parties or the district court persuades us to the contrary.
In addition to Redd Horne, the district court also cited and analyzed On Command
Video Corp. v. Columbia Pictures Industries, 777 F.Supp. 787 (N.D.Cal.1991), in its
transmit clause analysis. In that case, defendant On Command developed*139 and
sold “a system for the electronic delivery of movie video tapes,” which it sold to
hotels. Id. at 788. The hub of the system was a bank of video cassette players,
each containing a copy of a particular movie. From his room, a hotel guest could
select a movie via remote control from a list on his television. The corresponding
cassette player would start, and its output would be transmitted to that guest's
room. During this playback, the movie selected was unavailable to other guests.
See id. The court concluded that the transmissions made by this system were made
to the public “because the relationship between the transmitter of the performance,
On Command, and the audience, hotel guests, is a commercial, ‘public’ one
regardless of where the viewing takes place.” Id. at 790.
Thus, according to the On Command court, any commercial transmission is a
transmission “to the public.” We find this interpretation untenable, as it completely
rewrites the language of the statutory definition. If Congress had wished to make
all commercial transmissions public performances, the transmit clause would read:
“to perform a work publicly means ... to transmit a performance for commercial
purposes.” In addition, this interpretation overlooks, as Congress did not, the
possibility that even non-commercial transmissions to the public may diminish the
value of a copyright. Finally, like Redd Horne, On Command is factually
distinguishable, as successive transmissions to different viewers in that case could
be made using a single copy of a given work. Thus, at the moment of transmission,
any of the hotel's guests was capable of receiving a transmission made using a
single copy of a given movie. As a result, the district court in this case erred in
relying on On Command.
Plaintiffs also rely on Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277
(3d Cir.1991), in which the Third Circuit interpreted § 106(3) of the Copyright Act,
which gives the copyright holder the exclusive right “to distribute copies ... of the
copyrighted work to the public,” 17 U.S.C. § 106(3) (emphasis added). The court
concluded that “even one person can be the public for the purposes of section
106(3).” Ford, 930 F.2d at 299 (emphasis added). Commentators have criticized
the Ford court for divesting the phrase “to the public” of “all meaning whatsoever,”
2 Nimmer & Nimmer, supra, § 8.11[A], at 8-149, and the decision does appear to
have that result. Whether this result was justified in the context of the distribution
right is not for us to decide in this case. We merely note that we find no compelling
reason, in the context of the transmit clause and the public performance right, to
interpret the phrase “to the public” out of existence.
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In sum, we find that the transmit clause directs us to identify the potential audience
of a given transmission, i.e., the persons “capable of receiving” it, to determine
whether that transmission is made “to the public.” Because each RS-DVR playback
transmission is made to a single subscriber using a single unique copy produced by
that subscriber, we conclude that such transmissions are not performances “to the
public,” and therefore do not infringe any exclusive right of public performance. We
base this decision on the application of undisputed facts; thus, Cablevision is
entitled to summary judgment on this point.
This holding, we must emphasize, does not generally permit content delivery
networks to avoid all copyright liability by making copies of each item of content
and associating one unique copy with each subscriber to the network, or by giving
their subscribers the capacity to make their own individual copies. We do not
address whether such a network operator would be able to escape any other form
of copyright liability, such as liability for unauthorized reproductions or liability for
contributory infringement.
In sum, because we find, on undisputed facts, that Cablevision's proposed RS-DVR
system would not directly infringe plaintiffs' exclusive rights to reproduce and
publicly perform their copyrighted works, we grant summary judgment in favor of
Cablevision with respect to both rights.
CONCLUSION
For the foregoing reasons, the district court's award of summary judgment to the
plaintiffs is REVERSED and the district court's injunction against Cablevision is
VACATED. The case is REMANDED for further proceedings consistent with this
opinion.
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