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FTC Takes on Spyware Software; Delaware Supreme Court Sides With Anonymous Speaker

November 22, 2005

FTC TAKES ON SPYWARE SOFTWARE

The Federal Trade Commission (FTC) is not happy with a plan where a New Hampshire based company allegedly secretly installed an adware program, by making false representations that the computer user was actually downloading software that permitted anonymous Web browsing.  The FTC filed a federal lawsuit in September alleging that such conduct violates the FTC Act.

The complaint alleges that, since September 2003, Odysseus Marketing Inc. and its principal, Walter Rines, have advertised software that purportedly would allow consumers to engage in anonymous peer-to-peer file sharing. The company's marketing material touted the ability to "Download Music Without Fear." 

The complaint contends that the claims were false and misleading. The FTC claims that the software did not make file-sharing anonymous and the "free" software was bundled with spyware called Clientman that secretly downloaded dozens of other software programs, which allegedly degraded consumers' computer performance and memory.

The complaint says that the software replaced or reformatted search engine results. Thus, according to the FTC, consumers who downloaded the spyware and then tried to conduct a Google or Yahoo! search would be taken to a page that appeared to be legitimate, but, according to the agency, was designed to look exactly like a Google or Yahoo! site. The bundled software programs also generated pop-up ads and captured transmit information from the consumers' computers to servers controlled by the defendants, according to the complaint.

The FTC charges that Odysseus hid their disclosure about the adware in the middle of a two-page end-user licensing agreement, buried in the "Terms and Conditions" section of their Web site.

It's never a good idea to predict the outcome of litigation so early in the process.  But it looks like rough sailing ahead for Odysseus. 

DELAWARE SUPREME COURT SIDES WITH ANONYMOUS SPEAKER

The Delaware Supreme Court has ruled that when a public figure brings a defamation lawsuit against an anonymous speaker, the public figure must come forward with at least enough facts to defeat a motion for summary judgment before the court will issue a subpoena to divulge the speaker's identity.  In addition, the court found that the speaker must be given a reasonable amount of time to respond before the party seeking the subpoena may take further action.

Patrick Cahill, a city councilman in Smyrna, Delaware, along with his wife Julia, brought suit against Doe, a blogger who posted an article on a blog sponsored by the Delaware State News. The article criticized Patrick Cahill's performance, accusing him of, among other matters, "an obvious mental deterioration." 

Finding that the Cahills had a "good faith" belief in their defamation claim, the superior court issued a subpoena requiring the site's Internet service provider to disclose the identity of the anonymous poster. Doe filed an interlocutory appeal.

The Delaware Supreme Court rejected the lower court's "good faith" standard, finding that standard to be inadequate. "In our view, this 'good faith' standard is too easily satisfied to protect sufficiently a defendant's right to speak anonymously," the court observed.

The Supreme Court also found that even a more stringent "motion to dismiss" standard would not go far enough.  According to the Court, "Substantial harm may come from allowing a plaintiff to compel the disclosure of an anonymous defendant's identity by simply showing that his complaint can survive a motion to dismiss or that it was filed in good faith. Setting the standard too low will chill potential posters from exercising their First Amendment right to speak anonymously."

In an effort to avoid this "chilling effect," the Supreme Court adopted a "summary judgment" standard." According to the Supreme Court:

• applying a summary judgment standard to a public figure defamation plaintiff's discovery request to obtain an anonymous defendant's identity will more appropriately protect against the chilling effect on anonymous First Amendment internet speech that can arise when plaintiffs bring trivial defamation lawsuits primarily to harass or to unmask their critics.

The court did not stop there.  It found that that the plaintiff must also comply with certain notification requirements, including:

• notifying the poster that he/she is subject to a subpoena or application for an order of disclosure by posting a message of notification on the same message board as the allegedly defamatory post; and
• providing the poster a reasonable opportunity to file and serve an opposition to the discovery request before taking further action.

Having adopted the new standard, the Supreme Court then applied it to the facts before it and found the statements incapable of defamatory meaning, it then reversed the judgment below and remanded with instructions to dismiss the complaint with prejudice.

The right to speak anonymously on the one hand, and the right to bring defamation suits when appropriate, have butted heads since the dawn of the Internet.  This case is one more attempt to find a balance. 

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This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.