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In one of the first trials in the country to address Internet defamation, a Dallas County, Texas, jury last week rejected a $700 million suit by an Internet company that claimed it was harmed by negative electronic messages posted by an employee of a competing company. ZixIt, a Dallas Internet company, filed ZixIt Corp. v. Visa International, et al. in 1999, alleging it was harmed by Paul Guthrie, then a vice president with Visa. ZixIt alleged in its suit that Guthrie posted more than 400 anonymous messages, many of them negative, about ZixIt on the Yahoo Finance ZixIt Internet message board, causing ZixIt’s stock price to drop. The suit also alleged that the postings destroyed the company’s ability to market its ZixCharge Internet transaction authorization system, which allows consumers to make purchases without revealing their credit card numbers to merchants. Visa has a similar Internet payment system. ZixIt alleged that the postings caused its stock price to plummet. Had the product been successful, the company believed it would have been worth more than $1 billion, according to lawyers involved in the case. On July 31, a jury in Judge Merrill Hartman’s 192nd District Court found that ZixIt’s product was not harmed by the postings. Neal Manne and Kenneth McNeil, lawyers from Houston’s Susman Godfrey who represented ZixIt at trial, did not return calls for comment by press time. “The company hasn’t made any decision about an appeal,” says Cindy Lawrence, a ZixIt spokeswoman. “The outcome of the lawsuit doesn’t have any effect on our future products and services in e-messaging.” GETTING GRADED Visa’s lawyers alleged that Guthrie acted on his own and had a right to free speech, and that Guthrie’s Internet postings had no effect on ZixIt’s stock. Guthrie has since left Visa, lawyers for the company say. Guthrie was not a defendant in the case. However, his interests in the case were represented by Todd Noonan, an attorney in Sacramento, Calif.’s Stevens & O’Connell. Noonan was recovering from surgery last week and was unavailable for comment. “I think people believe whether you succeed or fail [is] because of what you do and not what other people do to you. Internet companies didn’t succeed for all sorts of reasons,” says Jeff Tillotson, a partner in Dallas’ Lynn, Tillotson & Pinker, who defended Visa at trial. ZixIt’s case was a hard sell to the jury, especially with the reality of the economy, Tillotson says. “Everyone knows that the stock market has fallen and the trouble with Internet companies. I think the jury took that into account,” Tillotson says. There were lessons to be learned from the Internet defamation trial, says Mike Lynn, who also represented Visa at trial. Even though message boards are considered a protected form of free speech, that freedom won’t prevent a company from being dragged into court if its employee blasts another company on the Internet, Lynn says. “A company can be responsible for what an employee posts on a message board,” Lynn says. “The courts have said you’re entitled to go to a jury to determine whether there are damages as a result of that. The law is very odd, not mature, [and] damage theories are not mature.” The nature of the case also added an interesting twist to the trial, Tillotson says. Many of those who posted messages on the board attended the trial and posted comments about the daily proceedings throughout the three-week trial, he says. “It was apparent to everyone that many of the people who posted on these message boards were watching the trial,” Tillotson says. “It really was wild. The lawyers felt like they were being graded.”

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