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Mastermind Liable Under CFAA for Directing Third Party Action; Trademarks in Website Meta Tags Not Infringement
June 24, 2008
Mastermind Liable Under CFAA for Directing Third Party Action
A Pennsylvania federal court recently held that a defendant can violate the Computer Fraud and Abuse Act (CFAA) by expressly directing the actions of a third party.
In order to be held liable for a CFAA claim, a defendant must: (1) access a protected computer; (2) without authorization or by exceeding granted authorization; (3) knowingly and with the intent to defraud; and (4) as a result have furthered the intended fraud and obtained anything of value.
Plaintiff Binary Semantics, Limited is a software vendor who had marketed and distributed the defendant’s software to the Indian market. The defendant then decided to set up its own presence in India, eliminating the need for the plaintiff’s services.
To aid in the transition, the defendant allegedly contacted a Binary employee to request that she access confidential information contained in one of Binary’s computers and forward that information to the defendant. The Binary employee allegedly complied with this request and later left Binary to work for the defendant.
The defendant, in a motion to dismiss, asserted that because it had never accessed the confidential information itself, the claim could not stand. A Pennsylvania court held, however, that if the allegations were true and the defendant had specifically instructed the employee’s actions, the elements of the CFAA would be satisfied.
The court distinguished the facts of this case from a situation where an unrelated third party hacked the computer and later gave the information to the defendant. Here, because the defendant initiated and directed the hacking, the action constitutes "accessing" the protected computer, as required by the CFAA.
This case demonstrates that the mastermind, as well as the actual hacker, is covered by the CFAA.
Trademarks in Website Meta Tags Not Infringement
A federal court sitting in Wisconsin ruled that using trademarks in the meta tags of a non-competitor’s website does not constitute initial interest confusion. The court found that because meta tags are not used in modern search engines, they do not affect search results. Using the trademark in meta tags, therefore, does not cause a likelihood of user confusion.
Plaintiff Standard Process Inc. manufactures dietary supplements which are sold exclusively through authorized dealers. By contract, distributors are not permitted to sell Standard’s products online or to any other distributor.
Defendant Dr. Scott Banks is a former distributor of Standard’s products whose contract was terminated for selling the products on his website. Even after his termination, Banks continued to sell Standard’s products online.
Standard brought suit for trademark infringement, alleging that the use of the company’s trademark in the meta tags created the false impression that Standard was affiliated with the website. The court disagreed, holding that there was little likelihood of confusion, a necessary element of trademark infringement and false designation of origin.
Standard’s claim for trademark infringement was barred by the first sale doctrine. The judge ruled that because the goods being sold on the website were genuine, there was no infringement issue.
The court further rejected Standard’s argument that the products sold on the website were materially different from those sold by authorized dealers because of a lack of quality control with the online sales. Because online buyers do not expect personal consultations, the court found no latent defect in the products due to the failure to execute the company’s quality control policy.
The judge went on to state that Banks’ use of trademarks in meta-tagging was unlikely to cause customer confusion. The court distinguished this case from a similar Seventh Circuit case which held that the use of a competitor’s trademarks in meta tags constituted infringement. The present court looked to the fact that more modern search engines make little use of meta tags. Further, Banks was not competing with Standard, but was simply reselling Standard’s products.
The court was also persuaded by Banks’ voluntary use of disclaimers on his website, which expressly stated that he was not an authorized dealer of Standard’s products. The disclaimers, together with the minimal use of any logos or pictures on the site, supported the finding that there was little likelihood of customer confusion.
This case illustrates that legal theories often evolve along with technology.
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.