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False statements posted on message boards or in chat rooms are capable of causing tremendous damage to businesses and investors. While suing the person who posted the defamatory content is normally effective, alternative legal actions are likely to be as effective and less costly. Fortune500 companies, including Microsoft, Ford, Wal-Mart and EDS, as well as many others, have been harmed by cybersmears. Most cybersmear-related lawsuits allege false and disparaging rumors — posted on electronic bulletin boards or in Internet chat rooms — about a company, its management or its stock. While some companies believe that Internet defamation is virtually impossible to control, that is not the case. FILING SUIT One response that has been effective is to identify and sue those who have made disparaging remarks. Frequently, cybersmearers employ pseudonyms or misleading identities, which at first glance appear to create a shield to hide behind, leaving a defamed plaintiff without a potential defendant. But anonymous cybersmearers are routinely identified by Internet service providers. Due to the cost of lawsuits and fighting the subpoenaing of records, AOL, Earthlink, Yahoo and other ISPs have concluded it is better to simply turn over the records, as requested. In short, the financial burden to protect cybersmearers is not economical. Subpoenaing records may result in the disclosure of the anonymous cybersmearer within two weeks, depending on the online provider’s subscriber notification policy. Once an anonymous cybersmearer has been identified, direct communication among the parties usually alleviates the need to continue the litigation. Normally, cybersmearers are members of one of the following groups: disgruntled employees; customers; competitors; or short-sellers seeking to drive down a stock price. Companies must contemplate the costs and nuisance of litigation; whether they will give the cybersmearer, and the cybersmear, even greater recognition; the public relations impact of taking the cybersmearers to court; and whether the suit could result in an issue that will set in motion a regulatory response. ALTERNATIVES Before turning to litigation it may be prudent to consider the following low-cost actions that might reduce negative publicity associated with Internet sites know as “chat rooms.” These actions are based on the legal principle that by maintaining a chat room, an ISP is considered to function as a publisher. Thus, the ISP becomes liable for the content associated with its chat rooms. Consequently, chat room material gives rise to all of the potential liability faced by conventional publishers. These include copyright infringement, trademark infringement, publicity rights violations, Federal Trade Commission regulation violations and defamation. There is no significant Internet chat room exception carved out of the law of copyright infringement. Thus, if a chat room cybersmearer uses another’s copyrighted material without permission, an infringement liability exists. The publication of infringing material by the chat room operator results in the risk of being held liable as a contributory infringer, even where such operator did not originate the offending material. All that is necessary to establish liability for contributing to infringement by another is knowledge of the copyright infringement and significant help or assistance. Therefore, merely providing the server into which the infringing material is stored and facilitating transmission to others may amount to sufficient assistance — requiring only proof of knowledge of the infringing nature of the material to establish liability. While individuals who have engaged in chat room cybersmearing may be subject to penalties associated with the actions noted above, most low-cost solutions to adverse chat room content involve working with chat room operators. In Playboy Enter., Inc. v. Frena, 839 F. Supp. 1552 (1993), the operator of a subscription computer bulletin board service included unauthorized copyrighted material loaded by bulletin board customers. Although the defendant in Playboystated that he never himself uploaded or downloaded the copyrighted photographs, the court nonetheless held him liable for copyright infringement. Recommendation: If copyright material is being used in the chat room, then an effective, low-cost solution is to send a cease-and-desist notice to the chat room operator. Such a letter should note that statutory damages are in the range of $200 to $100,000 per infringement. If the chat room cybersmearer used another’s trademark, both the unauthorized user and the chat room operator may be liable for infringement. The Lanham Act prohibits the use of another’s trademark, symbol or name in a way that falsely suggests the affiliation, connection, association or sponsorship by that person of the alleged infringer’s goods or services. Thus, if the chat room’s use of a company’s name suggests some sort of tie-in, and that company did not give permission to the use of its trademark, then a claim based on dilution of trademark arises. The chat room operator may be held liable for contributory infringement if it can be found that he or she “knowingly cooperated in illegal and tortious activity.” Therefore, until the chat room operator is put on notice of the trademark infringement, little action can be taken by a company that has been subjected to a cybersmear. If, however, a determination is made that the chat room operator monitors the chat services for other purposes — such as obscenity, racial epithets, defamation or copyright infringement — and in the process gained knowledge of materials that infringe the trademarks of others, a contributory infringement action is warranted. Recommendation: If trademark material is being used in a chat room, send a cease-and-desist notice to the chat room operator, suggesting the existence of contributory infringement. The right of publicity permits anyone to sue for unauthorized use of his or her name or likeness in advertising. But the First Amendment limits the extent to which state law claims for violation of the rights of publicity and privacy can be based on the use of a name or likeness in connection with information, news and other editorial content. Thus, state statute and common-law requirements for permission to use a person’s name or likeness are generally limited to use for trade and advertising. Advertising is basically defined as a communication whose principal purpose is to propose an economic transaction. Chat room transactions have been found to be advertisements in disguise and, in such cases, the use of another’s name has been found to be a violation of the right of publicity. Just as in the case of a conventional magazine, which contains advertising where permission is obtained for the use of a name, the same is true of a chat room advertisement. Recommendation: Review the chat room content to determine if it is advertisement in disguise (hence a violation of the right of publicity), then, if appropriate, consider sending a cease-and-desist notice to the chat room operator. Defamation is another basis for action by a company subjected to a cybersmear. Defamation is the publication to another of a false statement of fact about a business that causes the business to suffer harm to its reputation. Chat room operators in this case are considered to have republished defamatory matter and are subject to liability just as if they had originally published the false statement. Two decisions address chat room operator liability and both suggest that the degree of editorial control exercised by the operator will be the determinative factor. Both cases, Cubby, Inc. v. CompuServe, Inc., 776 F. Supp. 135 (1991), and Stratton Oakmont, Inc. v. Prodigy Services Co., 23 Media L. Rep. 1794 (N.Y. Sup. Ct. 1995), have been extensively used to remove adverse chat room content. Recommendation: Review the chat room content to determine if it is defamatory, then send a cease-and-desist notice to the chat room operator and cite the Cubby and Stratton Oakmont cases. The FTC has made it absolutely clear that the full force of laws prohibiting false advertising, deceptive trade practices and fraud is applicable to the Internet. Chat room operators may be liable for violating FTC regulations if, for example, they allow users to post defamatory remarks or misuse trademarks and such actions are expressly prohibited by their own published rules of conduct. Recommendation: Review the chat room’s conduct rules with respect to the cybersmear related content. If a content conduct violation is found, send a cease-and-desist notice to the chat room operator citing the appropriate FTC regulation. In an attempt to appropriately resolve cybersmear related legal difficulties, some courts have departed from more traditional principles and used the same technology that gave rise to the controversy. In Dendrite International, Inc. v. Does, 342 N.J. Super. 134 (2001), the court addressed anonymous Internet speech in connection with a request for expedited discovery. The Dendritecourt, relying on McIntyre v. Ohio Elections Comm., 514 U.S. 334 (1995), received much publicity due to the judge’s order that Yahoo, the proposed recipient of an expedited discovery request, post notice of the lawsuit on its Web site to provide the John Does with an opportunity to enter the action anonymously and to attempt to preserve their privacy rights. Few cases have been litigated to a final judgment. Thus, it remains unclear as to which theories of liability will ultimately prove most successful. However, firms have increasingly used defamation suits as an offensive weapon in their efforts to combat the online comments of a defamatory critic. Clearly, firms subjected to cybersmears may use the discovery process by filing suits that are aimed at unmasking anonymous wrongdoers. But prior to expending the resources necessary to initiate such action, companies should consider communicating with the chat room site provider about the provider’s responsibility and potential liability. Jonathan Bick is counsel to Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer & Gladstone (www.bracheichler.com)of Roseland, N.J., and is an adjunct professor of Internet law at Pace Law School and Rutgers Law School. He is also the author of “101 Things You Need To Know About Internet Law” (Random House 2000). If you are interested in submitting an article to law.com, please click herefor our submission guidelines.

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