Technology Law Column

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Published in the Chicago Daily Law Bulletin, April 9, 1998 at page 5.

Junk e-mailers face attack on several fronts

Copyright 1998 by David Loundy

Unsolicited Commercial E-mail ("UCE" or "spam") is once again the topic of the day in cyberlaw circles. I have mentioned in past articles efforts to sue over UCE. Theories have included trademark infringement (for forging addresses in the e-mail headers), trespass to chattels (a wonderfully Victorian cause of action to bring against someone for inappropriate computer use), and even violation of computer crime laws. I have also mentioned efforts to pass federal legislation outlawing junk e-mail, just as Congress did to help address the problem of junk faxes. Though Congress may be slow in addressing the issue, the court cases have been moving quickly.

After America Online's earlier victories against spammers, the on-line service has been trying for a volume discount in the federal courts. AOL has brought suit against nearly a dozen junk e-mailers, and a number of the suits have resulted in favorable settlements for AOL. Other service providers have also been suing spammers-- suits have been filed by Juno Online Services L.P, Bigfoot Partners, RustNet, Hotmail, Typhoon, Inc., and Earthlink Networks-- and many other providers have also contemplated filing suits on their own.

The issues motivating this article, however, include the recent settlement of a lawsuit brought by Earthlink against Cyber Promotions and its president, Sanford Wallace, the first lawsuit brought by the Federal Trade Commission against a spammer, and new legislation passed in Washington State severely limiting the sending of junk e-mail.

Sanford Wallace has been the poster child for junk e-mailers. In fact, he even adopted the name "Spamford" Wallace, much to the chagrin of the Hormel Foods Corp., makers of the Spam potted pig product. At one point, it was calculated that Wallace's company was sending more than one million pieces of UCE a day to AOL users alone. (AOL has claimed that as much of one third of the e-mail it processes is UCE).

Perhaps as a result of having several suits brought against him (and even receiving a cease-and-desist letter from Hormel), he has stopped sending out junk e-mail himself. Instead, he has 'repurposed' his company to help others send out an amazing amount of junk e-mail. Since his company has had service cut off by almost every service provider it has used, generally because its actions violate the provider's acceptable use policy, Wallace and Walt Rines of Quantum Communications Inc. have been working to set up their own junk e-mail-friendly network under the name Global Technology Marketing Inc.

To have the time to set up his network, however, Mr. Wallace needed to settle the lawsuit recently filed against him by Earthlink. The suit, filed in California Superior Court (No. BC 167502, Judge Kenneth Freeman), accused Wallace of state and federal service mark infringement, state and federal service mark dillution, false designation of origin, unfair trade practices, unfair competition, misappropriation of computer resources, conversion, trespass, unjust enrichment, and violation of the Electronic Communications Privacy Act and the Computer Fraud and Abuse Act.

The settlement is noteworthy because it amounts to a crushing victory for the service provider. In essence, the settlement states that if EarthLink catches any Wallace-affiliated company sending junk e-mail to any EarthLink customer without receiving prior permission, Wallace will be personally liable for $1 million in damages. Wallace may be held liable not only for sending UCE, but also for encouraging others to send such mail to EarthLink subscribers, selling e-mail address lists which include EarthLink subscribers, or even selling software that others may use to send UCE to EarthLink subscribers.

Oh, and did I mention that the settlement also includes a consent judgement against Cyber Promotions for $2 million? In other words, the Titanic of the junk e-mail business has just met its iceberg.

While courts have been consistently ruling against the senders of junk e-mail based on the method of transmission of the messages, the Federal Trade Commission's interest in the subject matter of the messages has been growing. Much of the UCE that I receive consists of solicitations for questionable investments, home business opportunities, various miracle health remedies, pyramid schemes, and adult web sites. Needless to say, many of these messages are clearly illegal (and most of the rest are merely objectionable).

The Federal Trade Commission agrees and has filed suit in the United States District Court, District of Maryland against a Nevada company calling itself the "Internet Business Bureau" and the company's officers. The Internet Business Bureau attempted to sell Internet advertising opportunities, in part, by encouraging participants to send out spam to others. The FTC's complaint alleges that the company's promises of guaranteed income to participants violates Section 5 of the FTC Act, 15 U.S.C. 45(a). In addition, the FTC alleges that the promotion of the business opportunity does not meet with the requirements of its "Franchise Rule" which requires that certain disclosures be made. Without making proper disclosures, the defendant's action constitute unfair and deceptive trade practices.

Based on past successes the FTC has had in cracking down on Internet fraud, it will likely succeed in this case as well. It is an omen of things to come. One of the reasons that junk e-mail is the object of such fervent contempt is because even if you bypass the service providers' arguments that such e-mail is an unlawful impairment of their resources, you are still left with the fact that the majority of the junk e-mail is simply fraudulent. State and federal regulators are warming to the challenging of cracking down on such material, and more attempts at prosecuting the senders of such mail are inevitable.

Of course, the legislators do not want to be left out of the picture either. On the heels of Nevada passing an anti-spam law, Washington State has just passed one as well. HB 2752, signed into law on March 25, 1998, states that "[n]o person, corporation, partnership, or association may initiate the transmission of a commercial electronic mail message from a computer located in Washington or to an electronic mail address that the sender knows, or has reason to know, is held by a Washington resident" if the message has a forged message header or a false or misleading subject line. Furthermore, the legislation states that such a transmission constitutes a violation of the state Consumer Protection Act. The legislation also explicitly allows service providers to implement schemes to block messages which may violate the legislation, and the legislation grants the service provider immunity for any liability threatened as a result of trying to block such commercial messages.

The statute is one of the best state anti-spam laws that I have seen proposed. Unfortunately, it still has its problems-- such as the lack of a definition of a "commercial electronic mail message" as well as a potentially fatal loophole. Of course, the statute's biggest shortcoming is that it only applies to Washington State. Spam is an international problem, and a single-state solution will not solve the problems that UCE presents.

Technical solutions may provide one of the better answers to the problem of unwanted junk e-mail. There are a number of companies actively developing anti-junk e-mail solutions. When I receive UCE, I now forward it to two groups which are working on developing products to filter out unsolicited commercial e-mail intelligently.

One such product, MailGuard, has been generating international attention. This shareware program sends a query to the sender of any piece of incoming e-mail. If the query cannot be delivered, the original message is assumed to have been sent by a spammer, and all further mail from that address is automatically rejected. If a response is received, the original message is allowed through the filter, and the sender's address is added to an automatic "approve" list. Either the filter list or the approve list can be manually edited so that the software does not have to send a query when your employer or family members try to e-mail you. Spam-filtering software programs are not perfect, but in the case of a technological problem, such technological solutions may be more effective than legislation.

Many of the threats the Internet poses are substantially overblown by the media and certain special-interest groups. Unsolicited commercial e-mail, on the other hand, is a growing and pervasive problem. It allows scams to be widely distributed. It provides easy access to present-- but often reasonably hidden-- pornography, at a single mouse-click, by sending access-information indiscriminantly to any e-mail address a spammer can find, including children's mail boxes.

There are legitimate outlets for Internet advertisers to spread their messages which do not require forgery, trademark infringement and theft of service. Reducing UCE may inconvenience certain advertisers, but the net societal loss by restricting junk e-mail is worth the current and potential harm such unwanted e-mail now represents.

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