Federal Decision Supports Online Political Parody

June 21, 2011 | Professional Liability | Appeals | Complex Torts & Product Liability

Parody has long played an important role in intellectual property law, and in intellectual property litigation. It should be no surprise, therefore, that parody issues arise with respect to the Internet, and that over the years courts have issued a number of significant decisions involving claims of parody and the Web.

Earlier this year, The New York Times reported on a court battle over a website parody of a website operated by Koch Industries, Inc., a corporation that describes itself as “one of the largest private companies in the world” and that owns multiple companies involved in a wide variety of industries, including oil, coal, chemicals, fibers, pollution control equipment, forest and consumer products, and commodity trading. At the heart of the litigation was the tension between the enforcement under federal law of trademark rights, on the one hand, and free speech concerns, on the other.

Last month, the federal district court in Utah hearing the case issued a decision in Koch Industries, Inc. v. Doe rejecting Koch’s claims. The ruling, analyzing issues under the Anticybersquatting Consumer Protection Act (“ACPA”) and the Computer Fraud and Abuse Act (“CFAA”), among others, can serve as a roadmap for businesses attempting to decide how, if at all, they should respond to online parody as well as for those parties who seek to use parody (or other similar techniques) to criticize, educate, or make a political point.

Koch maintains a site under the domain name www.kochind.com that describes its companies and expresses its policy viewpoints on political issues. The site also includes periodic editorials taking issue with such things as the conclusions of scientists regarding climate change and the Obama administration’s environmental policies. Furthermore, Koch uses its site to respond to critics of its political views. No actual products or services are offered for sale through the site.

The case arose from a press release purporting to announce a decision by Koch to stop funding organizations that deny climate change. The press release was emailed to various news organizations and included a link to a web site, www.koch-inc.com. That site had the same look as the actual Koch site but included the fake press release. It also contained a link to the actual Koch site. It was available for mere hours before it was taken down. Additionally, the press release was immediately identified as a hoax by most, if not all, traditional press and reported on as hoax in the media.

The press release announced that Koch would “restructure its support for organizations that undertake climate change research and advocacy.” It claimed the company would withdraw funding from groups “whose positions on climate change could jeopardize America’s continued global competitiveness in the energy and chemical sectors.” These sentiments were in stark contrast to the policy view usually expressed by Koch. As the court noted, the press release and website were designed to appear as though they were created by Koch and were posted anonymously without mention of their true source.

Because of the fake press release and website, Koch brought a lawsuit asserting causes of action for federal trademark infringement, violation of the ACPA, federal unfair competition, violation of the CFAA, common law trademark infringement and unfair competition, and breach of the terms and conditions of Koch’s website.

After filing its complaint, Koch filed an ex parte motion for accelerated pre-conference discovery to seek the identity of the anonymous defendants. Koch sought to serve subpoenas on the domain registration company the defendants used to register the domain name www.koch-inc.com and the company that hosted the defendants’ site.

The court granted Koch’s motion and the subpoenas were served. The organization “Youth for Climate Change” identified itself as the source of the release and site, but moved to and was permitted to continue the anonymity of its individual members pending determination of its motion to quash the subpoenas and to dismiss the complaint, in deference to their First Amendment right to conduct political speech anonymously.

The court’s decision serially dismissed each of the several causes of action advanced by Koch, demonstrating that there was no cognizable claim for recovery despite Youth for Change’s undeniable use of the Koch name in a site that duplicated the look and feel of Koch’s true site.

In its decision, the court first analyzed the defendants’ contentions that Koch’s claims alleging trademark infringement and unfair competition under state and federal law should be dismissed because there was no commercial use of the trademark; rather, the trademark was solely used to make a political statement.

In response, Koch asserted that the defendants had issued the press release and set up the false web site “to deceive and confuse the public, to disrupt and harm Koch’s business and reputation, and to draw attention to and funding for Defendants’ activities.”

The court explained that the threshold question was whether the defendants’ speech was “commercial” and therefore within the jurisdiction of the federal Lanham Act. It found that the defendants’ press release and fake site “did not relate to any goods or services” and were “only political in nature.” In the court’s view, not only did the press release and site not relate to the defendants’ goods and services, “they did not relate to Koch’s goods and services.”

Moreover, the court rejected Koch’s assertion that the “confusion” caused by the fake site was sufficient to establish commercial use under the Lanham Act, finding that the press release addressed only Koch’s views on political issues. In any event, the court pointed out, none of the media outlets who received the press release believed it, and Koch had failed to allege any facts demonstrating confusion.

In addition, the court rejected Koch’s contention that it met the commercial use requirement by asserting that the defendants issued the press release and set up the site with the intent to draw attention to and funding for the defendants’ activities, finding this theory “not factually plausible.” As the court pointed out, the defendants did not identify their group in their release or on the fake site, and such anonymity was “inconsistent with Koch’s allegation that they sought attention for fundraising purposes.” Accordingly, the court granted the defendants’ motion to dismiss Koch’s Lanham Act claims (and, for the same reasons, its similar state common law causes of action for trademark infringement and unfair competition).

ACPA Claims

The court next rejected Koch’s efforts to bring its claim within the ACPA. As the legislative history makes clear, Congress enacted the ACPA to address “a new form of piracy on the Internet caused by acts of ‘cybersquatting,’ which refers to the deliberate, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners.”

To establish liability under the ACPA, Koch had to show that the defendants used or registered the domain name with a bad faith intent to profit. As the court observed, in the absence of such a profit motive – that is, where the use of a trademark constitutes “bona fide noncommercial or fair use” – the ACPA does not apply.

The court pointed out that Koch did not allege that the defendants had registered www.koch-inc.com with the intent to sell it for profit or that the defendants intended to profit by diverting customers from Koch’s own site. In the court’s view, the hoax site was not designed to sell anything – and neither did Koch’s actual site. “There was no commercial purpose” to the hoax site, only a political purpose, the court continued. It therefore ruled that the defendants’ conduct was “not the type of harm that the ACPA was designed to protect.”

CFAA and Breach of Contract

As the court next explained, the CFAA is a criminal statute that penalizes individuals who “hack” into protected computer systems. The CFAA imposes criminal and civil liability upon a hacker who accesses a computer system “without authorization or exceeds authorized access.”

Koch asserted that in creating the fake web site, the defendants acted without authorization and inconsistent with the company’s grant of access. Inherent in this theory is the reasonable assumption that the defendants must have accessed Koch’s site in order to duplicate its design and layout to create their hoax site. Even if the defendants had some limited authorization, Koch contended that they acted beyond the authorization granted by breaching its site’s terms of use.

Koch’s CFAA theory therefore was related to its breach-of-contract theory, which asserted that the defendants agreed to the terms of use by using Koch’s site. In response, the defendants argued that both theories lacked merit. The court agreed and dismissed both causes of action as a matter of law.

The court pointed out that to state a plausible claim under the CFAA, one must be guilty of gaining “unauthorized access” or “exceeding authorized access” to a protected computer system. In this case, however, the court noted that the defendants created a mockup of Koch’s site using information that Koch made “publicly available on the Internet, without requiring any login, password, or other individualized grant of access.”

The court ruled that, by definition, the defendants could not have “exceeded’ [their] authority to access that data.” Koch’s complaint, the court reasoned, was not that the defendants obtained the information without authorization, but rather that they ultimately used the information in an unwanted manner. The CFAA, however, “addresses only the act of trespassing or breaking into a protected computer system; it does not purport to regulate the various uses to which information may be put,” the court declared.

Interestingly, the court rejected Koch’s contention that liability under the CFAA could be premised on a contractual theory related to the Koch site’s terms of use, explaining that Koch’s complaint did not allege or produce evidence “of any manifestation of assent to those terms.”

The court therefore concluded that Koch had not alleged a plausible claim that the defendants had engaged in unauthorized access of a protected computer system, manifested assent to the terms of use on Koch’s site, or even that the web site provided any method by which consent could be manifested.

Accordingly, it concluded that Koch’s failure to articulate any plausible theory on these points demonstrated that its CFAA and breach of contract claims could not survive a motion to dismiss.

Conclusion

Second Circuit law has thus far developed a more sympathetic leaning towards initial confusion claims, even in not-for-profit settings, but has not yet definitely ruled as to purely political speech as did the court in Koch.

The Koch ruling certainly does not bar all lawsuits stemming from Internet parody. Indeed, individuals or companies who seek to benefit monetarily from “parody” are very likely to find courts less receptive to them than in cases of purely political speech.

Likewise, more robust protection of a site’s content, such as through limiting access by password or requiring affirmative agreement to terms of service could affect the outcome. By the same token, businesses that are subjected to Internet (or other) forms of parody may find that means other than litigation best protect their interests, and that litigation should be reserved for the most extreme cases. As the courts continue to explore the issues that arise in these cases, the law will continue to develop.

This article is reprinted with permission from the June 21, 2011 issue of the New York Law Journal. Copyright ALM Properties, Inc. Further duplication without permission is prohibited. All rights reserved.

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