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A San Diego-based pharmaceuticals company has abandoned two appeals against a pair of stockholders who posted critical messages on Internet message boards. The company — Hollis-Eden Pharmaceuticals — also has agreed to pay $107,887 in attorney fees. Hollis-Eden said it would not press forward with appeals challenging a San Diego Superior Court judge’s decision to dismiss cases against defendants Richard Heckenkemp and Gregory Alcus under California’s anti-SLAPP statute. The settlement, announced Wednesday, is the latest in a series of deals and appeals surrounding Hollis-Eden’s attempt to search out a handful of anonymous Internet posters who attorneys say libeled the company and attempted to manipulate stock prices for financial gain and to possibly orchestrate a hostile takeover. “Hollis-Eden tried for a full year to use the court system to intimidate its critics into silence,” said Allison Zieve, a staff attorney with Washington, D.C.-based Public Citizen Litigation Group, which represented Heckenkemp and Alcus. “It’s certainly true defamation can happen on the Web, but at the same time if you are going to file a frivolous lawsuit, under California law, you are going to have to pay for it.” Hollis-Eden’s case is just one of a growing number of civil cases brought by companies and their executives who believe negative, often caustic postings on Internet message boards mar the company’s image and send stock prices plummeting. While attorneys on both sides of the table have declared some measure of success, the outcome of the case is decidedly mixed. In December 2000, Hollis filed suit against 10 defendants for posting messages that included: “Once again, in my opinion, the Public Relations Department of Hollis-Eden couldn’t promote Mickey Mouse into Disneyland;” and “I don’t think Hollis could find his way around Wall Street, with a road map, flashlight and a yellow cab.” Four defendants filed an anti-SLAPP motion, arguing it was a Strategic Lawsuit Against Public Participation. Alcus and Heckenkemp had their anti-SLAPP motions granted while the two others failed. Hollis-Eden would later file a second, separate defamation suit against Alcus, which a trial judge would again dismiss on an anti-SLAPP motion. Four additional defendants reached confidential settlements with Hollis, agreeing in part to repeatedly post public apologies on the Internet. Hollis-Eden won a default judgment against yet another defendant who didn’t answer the complaint. Monday, Zieve said the outcome should cause other companies to pause before firing off a lawsuit that muzzles free speech. “I think that companies will think twice before trying them again,” Zieve said. However, Hollis’ attorney, Robert O’Brien, said the litigation has been successful despite the most recent settlements with two defendants. “It’s important to look at the case as a whole,” said O’Brien, a partner with a Friedemann O’Brien Goldberg & Zarian in Los Angeles. “We feel the litigation to date has been successful and the company as a result of the litigation has been vindicated.” Zieve conceded that while California’s anti-SLAPP statute is a great tool, companies like Hollis-Eden too often get the last laugh because individual defendants often choose to settle instead of the costly alternative of hiring an attorney and fighting back. “There were people who just simply couldn’t afford a lawyer. It was just easier to say, ‘Fine, I will stop posting on your board,’” Zieve said. “Rather than taking the time to defend, they just decided to give up their First Amendment rights.” However, O’Brien said courts across the county and in California are making it clear that there’s no “Internet defense” to libel, securities fraud and other corporate crimes, including trademark and copyright theft. “There has been a movement, a feeling among groups of people that if you say or do it on the Internet, it’s a free-for-all,” O’Brien said. “The courts have found stock fraud is fraud, whether it takes place on the Internet or not.” One appeal remains in the case. Defendant Michael Wells, who lost his anti-SLAPP motion at the trial court level, has appealed the ruling to California’s Fourth District Court of Appeal.

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