Tech Law Journal Daily E-Mail Alert
December 18, 2001, 9:00 AM ET, Alert No. 330.
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Court Upholds Injunction Under CFAA Against Use of Scraper Program
12/17. The U.S. Court of Appeals (1stCir) issued its opinion in EF v. Explorica, a case regarding application of the Computer Fraud and Abuse Act (CFAA) and Copyright Act to the use of scraper software to extract price information from a competitor's web site. The Appeals Court affirmed a district court injunction against use of the robot.
Background. EF and Explorica both provide global tours for high school students. EF maintains a web site from which one may acquire the price of a particular tour. Explorica hired a programmer (named Zefer) who designed and used a computer program called a scraper. It made made over 30,000 inquiries to EF's web site to collect tour price data. It then organized this data in a spreadsheet. Explorica then used this data to undercut EF's prices. Zefer was able develop this program, including the ability to circumvent EF's security, with the assistance of an Explorica vice president who was previously VP for information strategy at EF. This VP had signed a confidentiality agreement with EF.
District Court. When EF learned of the scraper, it filed a complaint in U.S. District Court (DMass) against Explorica alleging violation of the CFAA, 18 U.S.C. § 1030, et seq., the Copyright Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, and various related state laws. EF sought a preliminary injunction barring Explorica from using the scraper program, and a return of all materials generated through use of the scraper. The District Court granted EF a preliminary injunction under the CFAA, relying on the copyright notice to find unauthorized access. This interlocutory appeal followed.
CFAA: Prohibition. 18 U.S.C. § 1030(a)(4) provides, in relevant part, that "Whoever knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $5,000 in any 1-year period".
CFAA: Definition of Authorized Access. The definitions section, at 18 U.S.C. § 1030(e)(6), provides that "the term ``exceeds authorized access´´ means to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter".
CFAA: Private Right of Action. 18 U.S.C. § 1030(g) provides, in part, that "Any person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief. Damages for violations involving damage as defined in subsection (e)(8)(A) are limited to economic damages. ..."
Appeals Court: Authorized Access. The Appeals Court wrote that the case turned on whether Explorica's access to EF's web servers "exceeds authorized access" within the meaning of §§ 1030(a)(4) and (e)(6). The Court noted that the former EF VP had signed a broad confidentiality agreement, and then provided confidential information about the web site to the Explorica programmer writing the scraper. The Court concluded that EF "will likely prove that whatever authorization Explorica had to navigate around EF's site (even in a competitive vein), it exceeded that authorization by providing proprietary information and know-how to Zefer to create the scraper. Accordingly, the district court's finding that Explorica likely violated the CFAA was not clearly erroneous."
Appeals Court: Loss. The Appeals Court next examined whether there was "damage or loss" sufficient to enable EF to maintain a civil action against Explorica. It wrote that "In the absence of a statutory definition for ``loss,´´ we apply the well-known rule of assigning undefined words their normal, everyday meaning. ... The word ``loss´´ means ``detriment, disadvantage, or deprivation from failure to keep, have or get.´´ ... Appellees unquestionably suffered a detriment and a disadvantage by having to expend substantial sums to assess the extent, if any, of the physical damage to their website caused by appellants' intrusion. That the physical components were not damaged is fortunate, but it does not lessen the loss represented by consultant fees."
Copyright and CFAA. The District Court had found a violation of the CFAA based on copyright. The Appeals Court wrote in a footnote that "we express no opinion on the district court's ruling that EF's copyright notice served as a ``clear statement [that] should have dispelled any notion a reasonable person may have had the `presumption of open access´ ´´ to EF's website."
First Amendment. Explorica raised the argument that the injunction violates its First Amendment free speech rights -- but not until oral argument. Hence, the Appeals Court did not consider it.
The Appeals Court upheld the injunction. However, by relying on the breach of the confidentiality agreement by the former EF employee, rather than copyright law, to find unauthorized access, the Appeals Court narrowed the class of cases to which its holding will likely apply in the future.
More News
12/17. The FCC released an order imposing a $1,020,000 fine against America's Tele-Network Corp. for slamming customers in violation of the Communications Act and the FCC's rules. (EB-00-TC-164) See, FCC release.
12/17. The FCC released it Order [69 pages in PDF], which it announced back on November 8, regarding procedures for processing applications for submarine cable landing licenses. See also, November 8 release.
12/17. The Department of Commerce's Technology Administration hosted a workshop titled "Understanding Broadband Demand: Digital Content & Rights Management". See, opening remarks of Bruce Mehlman (Asst. Sec. for the TA). See also, program agenda.
James Addresses Antitrust, Telecom, and Technology
12/13. Charles James, Assistant Attorney General for the Antitrust Division, gave a speech at the
19th Annual Institute on Telecommunications Policy & Regulation regarding antitrust enforcement and the telecommunications industry. He summarized the Antitrust Division's basic principles for reviewing telecom mergers. He discussed network effects and the essential facilities doctrine. In addition to telecom mergers and Section 271 applications by phone companies, he also discussed new technologies, such as Internet backbone, broadband facilities, and Third Generation wireless.
James began by stating that he has "limited knowledge" of these issues, but praised the knowledge of others in the Antitrust Division, including Hew Pate and Michael Katz. He also praised FCC Chairman Michael Powell, and the FCC's merger review process.
Consent Decrees. James stated that "the antitrust policy in this area has been made through consent decrees -- consensual arrangements, rather than litigated results." He elaborated that this is the case because counsel for merging parties are under pressure to "get the deal done." He cautioned that people should "read our consent decrees, but don't get married to them." He also questioned whether many merger reviews would have had different outcomes if they had been litigated. He specifically referenced the wireless mergers.
He also said that "We have asserted Internet backbone markets, and I know that that is a very complex matter in some cases. And, we have talked about broadband delivery mechanisms, again, another complicated and quickly evolving area. And, one has to always worry about how these cases would have fared in a litigation context."
Core Principles. James said that "There are three unifying principles that ... will guide our review process in telecommunications. First, and foremost, ... there is no such thing as a convenient facilities doctrine, as distinguished from an essential facilities doctrine. Second point, the Antitrust Division is not the Federal Antitipping Agency. And third, it is not the Antitrust Division's mission to punish success."
Essential Facilities Doctrine. James joked that there is no such thing as a convenient facilities doctrine. "Wouldn't it be nice if everybody got to free ride on other people's facilities. That is not what rule guides our policy," he said. Rather, "The antitrust approach should ask whether the transaction at issue will cause real exclusion or preclusion in a manner that maximizes or enhances market power."
He also stated that "facilities based competition is the thing that we are hoping will emerge ..." He also said that "competition in the broadband world, is likely to come ... from a variety of platforms", and that controlling one platform may not foreclose others from entry.
However, he elaborated that "We need to protect companies from cross subsidized predation or discriminatory access. But we have to do so without extended preferences that are unrelated to efficiency. One of the things that we see in terms of our work in the merger area, and our work in the 271 area, is that the sort of overly expansive creation of duties to deal, to share facilities, and the imposition of competitor obligations to cooperate could potentially stifle innovation. We should not loose sight of that point certainly in either the regulatory or antitrust enforcement context."
Networks. James' second point was that the Antitrust Division is not the Federal Antitipping Agency. He explained that "tipping occurs in the network where a significant combined penetration rate can cause certain consumers that have not already chosen the network to go with the larger entity. We in the Antitrust Division do not see our role as looking for markets that are about to tip and then throwing our bodies in the way of the process."
James continued that "Tipping in the network industry can have actually beneficial effects that lead to the achievement of efficiencies and a benefit to consumers that result from the increased likelihood of systems compatibility and changeability. Our role is not to prevent implementation or adoption of a single industry standard, or the creation of a dominant network, where that dominant network really flows from efficiency."
However, James added that the Antitrust Division is concerned "where a participant with market power, or monopoly power, may be engaging in anticompetitive conduct that is designed to maintain the monopoly or to illegally extend the monopoly into another market ..." However, he concluded that "in the competitive market occasionally somebody wins. And when somebody wins, that is not necessarily a ... non competitive result.
Economies of Scale. James said that his final point is that "the Antitrust Division does not and should not punish success." He then elaborated on this principle in the context of mergers involving economies of scale. He cautioned that "one of the ways in which we see this, very often, is that people talk about new technologies. ``Boy, if we had all of the spectrum, we could create a 3G cellular platform that is going to do this, that and the other thing.´´ And the fact of the matter is that these plans are not fully fleshed out. No one knows what the technologies people are going to be deploying, and no one knows how much spectrum is required in order to do. And guess what. If you don't know, you don't get to merge on the basis of an economies of scale defense."
Charles James also testified on December 12 before the Senate Judiciary Committee regarding the proposed settlement of the Microsoft antitrust case. See, prepared testimony.
People and Appointments
12/14. FTC Commissioner Orson Swindle was named head of the U.S. delegation to the OECD Experts Group for Review of the 1992 OECD Guidelines for the Security of Information Systems. See, FTC release.
12/17. Christopher Olsen was named Assistant Chief of the FCC's Enforcement Bureau's Market Disputes Resolution Division.
Christmas Schedule
The Tech Law Journal Daily E-Mail Alert will not be published on Monday, December 24, Tuesday, December 25, or Wednesday, December 26.
Tuesday, Dec 18
The House will meet at 12:30 PM for morning hour and 2:00 PM for legislative business. No recorded votes are expected before 6:30 PM.
9:30 AM. The Senate Finance Committee will meet to consider amendments to HR 3005, the Bipartisan Trade Promotion Authority Act of 2001. See, release [PDF]. The Committee met on December 12, and approved this bill. However, the meeting was rushed because Sen. Robert Byrd (D-WV) invoked an ancient Senate rule which had the effect of shutting down all committee meetings. Location: Room 215, Dirksen Building.
12:15 PM. The FCBA's Young Lawyers Committee will host a brown bag lunch. The speakers will be Commissioner Michael Copps' Legal Advisors: Jordan Goldstein, Paul Margie, and Susanna Zwerling. For more information contact Chris Moore at 202 224-9584 or moorecva or Yaron Dori at 202 637-5458 or
1:30 PM. The U.S. International Telecommunication Advisory Committee (ITAC) will hold a meeting. See, notice in Federal Register. Location: State Dept.
2:00 PM. Several groups will hold a telephone press briefing "to discuss their new educational Web site aimed at helping consumers better control their information online." The participants will be Paula Bruening (Center for Democracy and Technology), Scott Harshbarger (Common Cause), Shirley Rooker (Call for Action), Susan Grant (National Consumers League), Ken McEldowney (Consumer Action), and Beth Givens (Privacy Rights Clearinghouse). For more information, contact Paula Bruening at 202 637-9800,
Wednesday, Dec 19
LOCATION CHANGE. 10:00 AM. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection will hold a hearing titled Electronic Communications Networks in the Wake of September 11th. Rep. Stearns (R-FL) will preside. Room 2322, Rayburn Building.
10:00 AM - 12:00 NOON. The Federal Communications Commission's (FCC) Advisory Committee for the 2003 World Radiocommunication Conference (WRC-03 Advisory Committee) will hold a meeting. See, notice in Federal Register. Location: FCC, 445 12th Street, SW, Room TW-C305.
Deadline to submit oppositions and comments to the FCC in response to Cingular Wireless', Nextel's, and Verizon Wireless' petitions for reconsideration of certain provisions of the FCC's October 12 orders addressing and conditionally approving requests for waivers and approval of revised deployment plans for wireless Enhanced 911 (E911) services. See, FCC Notice. (CC Docket No. 94-102.)
Deadline to submit comments to the NTIA in response to its Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications. See, notice.
Thursday, Dec 20
10:00 AM. The Senate Judiciary Committee will hold a business meeting. Location: Room 226, Dirksen Building.
1:30 PM. The U.S. International Telecommunication Advisory Committee (ITAC) will hold a meeting regarding preparations for the 2002 World Telecommunication Development Conference. See, notice in Federal Register. Location: State Dept., Room 1408.
Friday, Dec 21
8:30 AM. FTC Chairman Timothy Muris will speak at the Brookings Institute roundtable titled "Trade and Investment Policy." Location: Brookings, Falk Auditorium, 1775 Massachusetts Ave., NW.
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