UBS WARBURG SANCTIONED FOR DESTROYING E-MAILS

On July 20th, Southern New York District Judge Shira Scheindlin ordered sanctions against UBS Warburg for destroying backup e-mail messages sought in an employment discrimination case. Judge Scheindlin said UBS Warburg, not its lawyers, was to blame. The judge ordered UBS Warburg to pay expenses and attorney fees incurred by the plaintiff, Laura Zubulake, in pursuing missing e-mails and other data. She also said she would give a negative jury instruction on the missing evidence in the case, Zubulake v. UBS Warburg, 02 Civ. 1243. The court said, "The proof is clear: UBS personnel unquestionably deleted relevant e-mails from their computers after August 2001, even though they had received at least two directions from counsel not to. Some of those e-mails were recovered ... but some -- and no one can say how many -- were not. And even those e-mails that were recovered were produced to Zubulake well after she originally asked for them." Further information may be found at http://www.law.com/jsp/article.jsp?id=1090180148744

On June 29th, the Department of Justice, never known as friendly to Freedom of Information Act (FOIA) requests, came up with a new reason for denying a request asking for its database on foreign lobbyists. According to Thomas J. McIntyre, chief in the DOJ’s office for information requests, "Implementing such a request risks a crash that cannot be fixed and could result in a major loss of data, which would be devastating." The Center for Public Integrity, which made the request in January, said it would appeal the DOJ’s decision. Attorney General John Ashcroft ordered federal agencies in October 2001 to review more closely which documents they release. Ashcroft's policy lets officials withhold information on any "sound legal basis." Further information may be found at http://www.wired.com/news/politics/0,1283,64032,00.html

On June 28th, the Washington state Court of Appeals upheld the state’s anti-spam law. The court ruled unanimously that a spammer cannot avoid liability by claiming that he did not know that some of the spam messages would end up in Washington state resident in-boxes. Under that interpretation, "no spammer sending deceptive e-mail could ever violate the act as long as he were to use a bulk e-mail program to harvest large numbers of addresses without regard to residence of the owners," Judge Faye C. Kennedy wrote for the panel. Kennedy also noted that Heckel never denied that he deliberately sent e-mails to everyone on the lists he obtained or that he had been warned about the state law and had been told state residents complained after receiving the messages. According to evidence presented by the state, Heckel sent 100,000 to one million e-mail messages weekly over a five-month period in 1998. Investigators said he broke the law by disguising the routing information, using another party's Internet address without permission and using misleading subject lines. The case, initially filed in 1998, was the first under Washington's anti-spam statute. The decision in Washington v. Natural Instincts may be found at http://www.courts.wa.gov/opinions/fa=opinions.opindisp&docid=512048MAJ

In late June, Amazon.com filed a countersuit against Toys "R" Us, seeking to dissolve the two companies’ online retailing agreement and asking for $750 million in damages. Toys "R" US filed the original suit in May, charging that Amazon.com had breached its agreement by partnering with other toy vendors. Toys "R" Us asked the court for $200 million it had already paid Amazon.com under their ten year agreement. Amazon's complaint, filed in New Jersey Superior Court in Passaic County, refers to Toys "R" Us' "chronic failure" to live up to obligations under the two companies' contract. In its counterclaim, Amazon.com denies that it breached its agreement with Toys "R" Us, saying the language of their contract allows for exceptions that permit Amazon and other merchants to sell products that compete with offerings from Toys "R" Us. Amazon further alleges that it urgently needs other merchants to list competitive products on Amazon because Toys "R" Us has failed to keep toys and other items in stock. Further information may be found at http://arstechnica.com/news/posts/20040629-3944.html

On July 2nd, the Federal Trade Commission signed an anti-spam agreement with the Office of Fair Trading, the Information Commissioner and the Secretary of State for Trade and Industry in the United Kingdom, and with the Competition and Consumer Commission and the Communications Authority in Australia. The agreement provides for the agencies to share information, exchange evidence and coordinate enforcement against cross-border spam violations. However, the agreement only calls for countries to cooperate when the spam is illegal in both jurisdictions. Because the approach is a "lowest common denominator" approach, effectively Australia and the United States will only have to cooperate with the United Kingdom, which has an "opt-in" spam law, when the spam in question violates their weaker "opt-out" laws. The Agreement may be found at http://www.ftc.gov/os/2004/07/040630spammoutext.pdf

On July 6th, the United States Court of Appeals for the District of Columbia Circuit upheld Microsoft's landmark antitrust settlement with the Department of Justice and several state attorneys general, rejecting Massachusetts' appeal for stiffer penalties. Massachusetts could appeal to the United States Supreme Court, but the high court would have to agree to hear the case. The decision may be found at http://caselaw.findlaw.com/data2/circs/DC/027155A.pdf

On July 1st, California’s new Online Privacy Protection Act (OPPA) of 2003 took effect. Companies operating a commercial website and doing business with California citizens must now post a conspicuous privacy policy and disclose the kinds of personally identifiable data that they collect and share with third parties. Companies must also clearly mark their privacy statements, abide by their policies, and inform consumers of processes to opt out of data sharing. The statute is the nation's first state law governing online privacy policies. Site operators in violation of the law will be subject to civil lawsuits, after a 30-day notification period. The text of the law may be found at http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=22001-23000& amp;file=22575-22579

In a study released at the beginning of July, the Business Software Alliance (BSA) and market researcher IDC found that software manufacturers lost $29 billion to piracy in 2003, more than double the previous year's losses. About 36 percent of software installations worldwide are pirated copies. The losses were greatest in Western Europe, where piracy cut revenue by $9.6 billion in 2003, followed by Asia and North America. The Business Software Alliance ascribed the rapid spread of piracy to peer-to-peer networks, where Internet users illegally swap software and other files such as music for free or at discounted prices. Vietnam and China had the world's highest rates, with pirated versions accounting for 92 percent of all computer software installed in each country, followed by the Ukraine with 91 percent, Indonesia at 88 percent, and Zimbabwe and Russia with 87 percent each. By region, about 53 percent of software applications on computers in Asia was pirated in 2003, compared with 70 percent in Eastern Europe, 63 percent in Latin America, 55 percent in the Middle East, 36 percent in Western Europe and 23 percent in North America. However, the dollar losses were largest in Western Europe, North America and Asia because of the sheer size of those markets and the growing use of expensive, sophisticated software in developed countries. The study may be found at http://www.bsa.org/globalstudy/loader.cfm?url=/commonspot/security/getfile.cfm&a mp;pageid=16908&hitboxdone=yes

The Motion Picture Association of America (MPAA) released a study in early July that showed that as many as 50 percent of the 3,600 Internet users surveyed had downloaded copyrighted content in the last year. Of those people who had downloaded films, 17 percent said they are going to the movies less often, and 26 percent said they bought fewer DVDs, according to online researcher OTX, which conducted the study in partnership with the MPAA. Global movie admissions were down by 4 percent in 2003 to about 1.57 billion, compared with 1.64 billion in 2002, according to research provided by the MPAA. The study found that 69 percent of those surveyed do not believe downloading movies is a major concern in today's society. The study may be found at http://www.mpaa.org/MPAAPress/2004/2004_07_08.pdf

On July 6th, the U.S. District Court for the Central District of California upheld California Secretary of State Kevin Shelley's April 30 directive that decertified touch-screen voting machines and withheld future certification until vendors of those systems could meet specific security requirements, including voter-verifiable paper audit trails (VVPAT). The plaintiffs had argued that banning the e-voting systems would disenfranchise visually or physically impaired voters. The court held that the Secretary of State’s decision was rational and designed to protect the voting rights of California citizens. The decision in American Association of People with Disabilities et al v. Kevin Shelley may be found at http://evotingcase.notlong.com

COURT ALLOWS E-MAIL SNOOPING

On June 29th, the First Court of Appeals in Massachusetts ruled that Bradford C. Councilman did not violate criminal wiretap laws when he secretly copied and read the mail of his customers in order to monitor their transactions. Councilman, owner of a website selling rare and out-of-print books, offered book-dealer customers e-mail accounts through his site. However, Councilman installed surreptitious code that intercepted and copied any e-mail that came to them from his competitor, Amazon.com. Although Councilman did not prevent the mail from reaching recipients, he read thousands of copied messages in order to know what books customers were looking for and to gain a commercial advantage over Amazon. Authorities charged Councilman with violating the Wiretap Act, which governs the unauthorized interception of communications. But the court found that because the e-mails were already in the random access memory of the defendant's computer system when he copied them, he did not intercept them while they were in transit over wires and therefore did not violate the Wiretap Act, even though he copied the messages before the intended recipients read them. The court ruled that the messages were in storage rather than transit. The court acknowledged that the Wiretap Act, written before the advent of the Internet, might be inadequate to address modern communication methods. The decision in U.S. v. Councilman may be found at http://www.ca1.uscourts.gov/pdf.opinions/03-1383-01A.pdf

On July 2nd, U.S. District Judge Rya Zobel in Massachusetts granted a preliminary injunction against a consulting firm that allegedly violated the Digital Millennium Copyright Act (DMCA) when performing maintenance on StorageTek tape backup systems. The judge found that Storage Technology, better known as StoreageTek, is likely to prevail in its lawsuit against a consultancy named Custom Hardware Engineering and Consulting, saying the controversial 1998 copyright law was violated when Custom Hardware effectively tricked a tape backup unit into believing that its technicians were granted full access to the system. The DMCA prohibits anyone from circumventing "a technological measure that effectively controls access" to a copyrighted work. Further information may be found at http://news.com.com/2100-1015-5266031.html

On July 19th, Lindows and Microsoft announced that they had ended their long-running trademark dispute, with Microsoft agreeing to pay Lindows $20 million. In exchange for the payment, Lindows will give up the Lindows name and assign related Web domains to Microsoft. Lindows will now globally transition its company name to Linspire. The U.S. trademark case has dragged on for more than two years, with the court refusing to impose an injunction on Lindows and ruling in the company's favor on several other matters. The deal calls for the company to permanently change its corporate name and drop all "Lindows" references from its products by September 14th. Lindows will also drop any petitions for trademark protection for the name, along with abandoning any legal cases based on the name. Further information may be found at http://www.microsoft.com/presspass/press/2004/jul04/07-19LindowsPR.asp

On July 15th, President Bush signed into law the Identity Theft Penalty Enhancement Act (ITPEA). The Act mandates minimum sentences for perpetrators of identity fraud, including "phishers," who fake e-mails and Web sites to steal bank account information and other potentially valuable data. The Federal Trade Commission estimates that ten million Americans become victims of identity fraud every year, while researcher Gartner places the annual number at around seven million. The ITPEA directs that anyone who, while engaged in an extensive list of enumerated crimes, knowingly "transfers, possesses, or uses, without lawful authority" someone else's identification will be sentenced to an extra prison term of two years with no possibility of probation. Committing identity fraud while engaged in certain major crimes sometimes associated with terrorism, such as aircraft destruction, arson, airport violence or kidnapping top government officials would reap the offender an automatic extra five years. Also, under ITPEA, merely possessing the "identification of another person with the intent to commit, or to aid or abet" a crime is illegal. The text of the Act may be found at http://thomas.loc.gov/cgi-bin/bdquery/z?d108:h.r.01731:

On July 15th, Judge Manuel Real of the U.S. Central District Court of California issued a summary judgment against Daniel Khoshnood of Canoga Park, Calif., and his businesses, Pointcom and Joshuathan Investments. Judge Real ordered Khoshnood to pay $4 million to Microsoft for allegedly using the software giant's product names fraudulently as part of a spam scheme. Microsoft contended that Khoshnood was responsible for two different spam e-mail campaigns that attempted to lure recipients into downloading desktop toolbar software. Microsoft claimed that in order to promote his e-mails, Khoshnood misrepresented himself as being associated with the update service for Microsoft's Windows operating system. His messages were labeled "Windows security warning." The messages allegedly directed people to a Web site operated by Khoshnood, www.windowsupdatenow.com, which informed visitors they should download the toolbar to update their Microsoft security patches. As a result, Microsoft sued Khoshnood for trademark infringement, false advertising and "cybersquatting," the practice of attempting to profit from the use of another entity's trademark using an Internet domain name. Khoshnood was also ordered to permanently forfeit a collection of domain names he had registered that closely resembled the names of Microsoft trademarks, including www.hottmail.com, www.microsoftc.com and www.wwmsn.com. Further information may be found at http://news.zdnet.co.uk/business/legal/0,39020651,39160838,00.htm

On July 7th, voters rights groups sued Florida election officials to overturn a rule prohibiting the manual recounting of ballots cast with touch-screen machines. The lawsuit called the rule "illogical" and said it rests on the questionable assumption that electronic voting machines perform flawlessly 100% of the time. It also said the rule violates a Florida law that expressly requires manual recounts of certain ballots if the margin in an election is less than 0.25% of the votes cast. The lawsuit was filed against the Florida Department of State, which oversees elections and which issued the rule in April. Plaintiffs included the American Civil Liberties Union of Florida, the nonpartisan political group Common Cause and other voter education and civil rights groups. The suit will be heard by the Division of Administrative Hearings in Tallahassee, the state capital. Further information may be found at http://computerworld.com/securitytopics/security/story/0,10801,94401,00.html

Ralph Blasek, a professional chess player and alleged leader of Europe’s largest software counterfeiting network, was sentenced to five and a half years in prison without probation by a German judge on July 22nd. According to court observers, the judge said, "This is checkmate to you Blasek. The court wants to see your king fall." Though he was convicted of fraud for selling illegal software to customers, the case centered on Blasek’s tampering with Microsoft's education software. According to Microsoft, Blasek obtained legitimate Microsoft software sold to schools and educational facilities at a discounted rate and then resold it as full versions to non-educational customers for well over the discounted price. Microsoft’s losses, due to Blasek’s activities, were estimated to be $5.5 million. Blasek is also believed to run a sophisticated international software-counterfeiting ring involving hundreds of front companies with bank accounts established around the world. Further information may be found at http://www.infoworld.com/article/04/07/22/HNswpirate_1.html

New York Attorney General Eliot Spitzer announced on July 12th that New York had settled a lawsuit filed against an electronic mail marketer for allegedly sending unsolicited and deceptive spam messages on behalf of clients. Spitzer said the marketer, Scott Richter, and his company, OptInRealBig.com, paid $40,000 in penalties and $10,000 in investigative costs under the agreement. The company also agreed to provide Spitzer's office with customer information and all advertisements it sends as well as promising to use proper identifying information when registering domain names. The fact the attorney general settled for $50,000 while initially talking about $20 million in damages "speaks for itself," Steve Richter said. The Consent Order and Judgment may be found at http://www.oag.state.ny.us/press/2004/jul/jul19a_04_attach.pdf

On July 21st, federal prosecutors charged Florida resident Scott Levine with electronically breaking into a massive data warehouse and stealing gigabytes of personal information on Americans. Levine was indicted by a federal grand jury in Arkansas for allegedly breaking into Acxiom's servers and downloading 8.2 gigabytes of data in what the U.S. Justice Department called one of "the largest cases of intrusion of personal data to date." Acxiom, based in Little Rock, Ark., operates the world's largest repository of consumer data and has as customers major banks, credit card companies, insurers and the U.S. government. Further information may be found at http://www.cnn.com/2004/LAW/07/21/cyber.theft/index.html

On July 15th, U.S. District Judge Robert Lasnik struck down a Washington state law designed to restrict the sale of violent video games to minors, saying that such restrictions violate free-speech rights. The court granted plaintiffs’ motion for summary judgment against the law, which was passed last year but had been suspended pending judgment in the case. The law would have imposed a $500 fine on anyone, such as a store clerk, who sold a video game depicting violence against "law enforcement officers" to minors under the age of 17. The order in Video Software Dealers Association v. Maleng may be found at http://www.theesa.com/SJORDER.pdf

The Electronic Freedom Foundation (EFF) has named the top 10 patents it wants eliminated, or at least redefined. The EFF said all 10 patents are in some way illegitimate and are being used to limit free expression. Part of its Patent Busting Project, the EFF in mid-June began soliciting the public for submissions of patents that were both potentially invalid and used to stifle online innovation. The organization received nearly 200 suggestions, 10 of which it will now formally ask the U.S. Patent and Trademark Office to re-examine. The patent list may be found at http://www.eff.org/patent/wanted

On July 7th, the company that sells the popular Hooked on Phonics reading instruction program settled a complaint by the Federal Trade Commission that it violated its own promises against disclosing personal information about customers, including their children. The complaint reflects government concerns about companies that collect personal details about customers under one set of privacy rules then later amend the rules without warning to permit broader disclosure. Further details may be found at http://www.ftc.gov/opa/2004/07/gateway.htm

A panel of experts convened by the Internet Corporation for Assigned Names and Numbers (ICANN) has taken aim at VeriSign's controversial Site Finder service. The panel issued a report on July 9th concluding that the contentious search service designed to make money from Web browser typos is a threat to the stability of the Internet and should remain offline indefinitely. The report may be found at http://www.icann.org/committees/security/ssac-report-09jul04.pdf

On July 9th, the U.S. District Court for the District of Connecticut denied an attempt by Pfizer, Inc. to serve the defendants in a suit against two websites, genericlipitors.com and econopetcare.com, by e-mail. The court said it was not convinced e-mail was the only method of serving the defendants or that the use of e-mail was reasonably calculated to apprise the defendants of the pending action. The decision in Pfizer v. Domains By Proxy may be found at http://www.ctd.uscourts.gov/Opinions/071304.SRU.Pfizer.pdf

On July 13th, the 2nd Circuit Court of Appeals upheld a lower court decision that denied a preliminary injunction that would have barred an online grocery site from using grocery product descriptions for online shopping developed and copyrighted by a rival site. The court ruled that the complainant showed only fair grounds for litigation since most of the materials were not protected by copyright. The decision in Mywebgrocer v. Hometown Info may be found at http://caselaw.findlaw.com/data2/circs/2nd/037909p.pdf

On July 13th, the U.S. District Court for the Northern District of Illinois issued a decision involving a sexual harassment claim brought against the City of Chicago over the viewing of pornography on the Internet in the workplace. While Judge Ruben Castillo dismissed some of the claims brought against the city, he allowed the Internet charges to continue noting that a jury could determine that the city was negligent in addressing the workplace issue. The decision in Williams v. City of Chicago may be found at http://www.ilnd.uscourts.gov/RACER2/index.html and making the appropriate selections for the search.

On July 21st, federal district court judge Gladys Kessler fined tobacco giant Philip Morris USA and its parent company, Altria Group Inc., $2.7 million for deleting e-mails that may be relevant in the government's lawsuit against the cigarette industry. Philip Morris officials deleted e-mails that were over 60 days old on a monthly basis for at least two years after an order was issued requiring the company to preserve all relevant documents and records. Philip Morris called the loss of the e-mails "inadvertent." Further information may be found at http://www.siliconvalley.com/mld/siliconvalley/news/editorial/9209289.htm

On July 14th, the U.S. District Court for the Northern District of Illinois ruled that the use of paid search engine advertising violated a court approved consent order in which the advertising party agreed to stop using the contested trademark. The court concluded that search engine advertising that used the trademark as the search term also fell within the agreement. The decision in International Star Registry of Illinois v. SLJ Group may be downloaded (Judge Castillo) at http://www.ilnd.uscourts.gov/RACER2/index.html

On July 22nd, a California appellate court ruled that a release provision in eBay's user agreement relieved the company of liability for the allegedly defamatory comments made by one of its users against another user. Though the court found that eBay was protected by the California Decency Act of 1996, it added that the law would not protect eBay for distributing information that it knew or had reason to believe was false. An appeal to the California Supreme Court is considered likely. The decision in Grace v. eBay may be found at http://www.courtinfo.ca.gov/opinions/documents/B168765A.PDF