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Designer Skin LLC v. S & L Vitamins, Inc., et al.
Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

MySpace, Inc. v. The Globe.com, Inc.

CV 06-3391-RGK (JCx) (C.D. Cal., February 28, 2007)

MySpace Permitted To Recover Liquidated Damages Of $50 For Each Unsolicited Commercial Email (Spam) Sent By Defendant

Court holds that defendant’s creation and use of 95 MySpace accounts to transmit unsolicited commercial email promoting its communications products runs afoul of both the CAN-SPAM Act, and California Business and Professions Code Section 17529.5, and violates MySpace’s Terms of Service.  Defendant created these accounts without identifying itself as the account holder.  The emails violated CAN-SPAM because they failed to contain either a valid physical address for defendant the Globe.com, or instructions on how to avoid receiving further email solicitations.  In addition, they were impermissibly sent to MySpace user email addresses generated by use of a script software program, another violation of CAN-SPAM.  They were also sent from email accounts obtained through false or fraudulent pretenses, as a result of defendant’s failure to accurately identify itself as the account holder.  

The Court found that these emails also violated California B & P Code Section 17529.5, both because they contained false header information that failed to identify the Globe.com as their source, and because they contained misleading subject lines that failed to accurately describe the emails’ contents.

Finally, the Court found defendant’s conduct violated MySpace’s Terms of Service, which prohibited the use of MySpace accounts both for commercial purposes and to transmit spam, and prohibited the use of scripts to generate email addresses for the transmission of commercial email to MySpace account holders.  As such, the Court held defendant liable for liquidated damages of $50 for each email sent as mandated by the Terms of Service.  In reaching this result, the Court rejected defendant’s challenge to such clause on the ground that it was an unenforceable penalty provision.

The Globe Sends Spam To MySpace Users From MySpace Accounts

Plaintiff MySpace operates a social networking site.  To utilize its service, a prospective user must open an account and create a user profile.  This, in turn, requires the user to identify himself, and provide an email address at which he can be contacted. 

The user must also click a box, indicating his assent to be bound by MySpace’s Terms of Service.  These terms of service prohibit the use of MySpace accounts for commercial purposes, or for the transmission of unsolicited commercial email.  They also prohibit the use of scripts to generate email addresses of MySpace users for the purpose of transmitting such email.

Defendant the Globe.com provides internet-based communications services known as TGLO Products.  To promote its products to MySpace users, the Globe.com opened 95 MySpace user accounts.  However, defendant did not identify itself as the account holder.  It also provided MySpace with email addresses that did not indicate that it was the owner of these accounts.

Defendant used these accounts to send commercial emails to MySpace users.  The emails promoted defendant’s internet communications services.  Defendant utilized a script program to identify email addresses of MySpace users, to which addresses it sent its email.

MySpace sent the Globe.com a cease and desist letter, demanding that it stop transmitting these emails.  Initially, defendant stopped its activities.  When it resumed its transmission of these emails, MySpace commenced suit, asserting claims, inter alia, that defendant violated both CAN-SPAM and California Business and Professions Code Section 17529.5, as well as site’s Terms of Use.  On plaintiff’s motion for summary judgment, the Court agreed, and awarded plaintiff judgment on each of these claims.

The Globe.com Violates CAN-SPAM

CAN-SPAM regulates the manner in which unsolicited commercial email may be transmitted.  A ‘provider of Internet access service’ that is harmed by a violation of the Act is granted a private right to sue for redress.  The Court held that MySpace, by making content and email available to others, qualified as a provider of Internet access services with standing to sue for a violation of the Act. 

The Court further held that email sent from one MySpace user to another over MySpace servers qualified as email that must meet the requirements of CAN-SPAM.  The Act defines email as a ‘message sent to a unique electronic mail address,’ which has both a unique user name and a reference to an internet domain.  As MySpace email is sent to users who possess unique urls that contain both a user name and the MySpace domain, they qualified as email subject to the Act’s strictures.

Emails Fail To Contain Either Opt-out Instructions Or Senders’ Address

The Court found that defendant’s emails violated numerous provisions of CAN-SPAM.  Section 7704(a)(5) of the Act requires that unsolicited commercial email contain both a valid physical postal address for the sender, and clear notice of the opportunity to decline receipt of further messages from the sender.  Defendant’s emails contained neither, and thus violated the Act.

In addition, section 7704(b) of the Act makes it an aggravated violation to initiate the transmission of commercial email unlawful under section 7704(a) where ‘the electronic mail address of the recipient was obtained using an automated means that generates possible electronic mail addresses by combining names, letter or numbers into numerous permutations.”  Because defendant used a script program to generate the email addresses of MySpace users to whom it sent the ‘spam’ at issue, it was held to have violated this provision as well.

False Header Information Because MySpace Accounts From Which Emails Sent Obtained Without Disclosing They Belonged To Defendant

Finally, the Court held that the Globe.com violated Section 7704(a)(1) of the Act, which prohibits the transmission of commercial email that contains false or misleading header information.  Such header information is considered false, for the purpose of CAN-SPAM, if it includes an originating email address accessed through false or fraudulent pretenses.  By failing to identify itself as the sender of these emails in their header, and opening MySpace account by supplying false information that failed to identify itself as the account holder, the Court held that defendant ran afoul of this section of CAN-SPAM as well.

The Court also found that defendant violated California B & P Code section 17529.5.  This section prohibits the transmission to or from California email addresses of commercial email containing false header information, or misleading subject lines.  Both because the headers failed to identify the Globe.com as the source of the email, and because the subject lines failed, in some instances, to accurately describe defendant’s solicitation, the Court found defendant violated section 17529.5

Liquidated Damages Recoverable Pursuant To MySpace Terms of Service

Finally, the Court found that defendant’s actions violated MySpace’s Terms of Service, which were binding on defendant because it clicked a box, indicating its assent to be so bound.  These Terms prohibited defendant from using a MySpace account both for commercial purposes, and to transmit unsolicited commercial email.  They also prohibited the use of scripts to ascertain the email addresses of MySpace users.  As stated above, defendant violated each of these provisions.

As a result, the Court held that plaintiff could recover the liquidated damages for such violations set forth in the parties’ contract.  These were set at $50 for each email sent by the defendants after the date this provision was incorporated into the parties’ contract – which occurred on March 17, 2006.

In reaching this result, the Court rejected defendant’s argument that this liquidated damage provision was an unenforceable penalty.    Liquidated damage provisions “are enforceable where (1) damages from a breach would be impracticable or extremely difficult to determine with certainty and (2) the amount represents a reasonable estimation of what such damages might be.”

The Court held that liquidated damages of $50 for each commercial email was a reasonable approximation of the potential damage caused by such conduct, and hence enforceable.  Said the Court:

The costs associated with this activity [bulk transmission of unsolicited commercial email] include not only infrastructure costs, such as additional bandwith and monitoring costs, they are also rife with large hidden costs.  Such hidden costs include those associated with deterrence (legal fees, software, etc.) depletion of customer goodwill and liability implications associated with the unlawfully advertise product.  Therefore, the damages related to Defendant’s breach are, in fact, impracticable or extremely difficult to determine.  As to the amount of liquidated damages, CAN-SPAM sets statutory damages for unsolicited commercial emails at $25-$300 per message.  Moreover, while the costs associated with spamming are difficult to definitively assess, the costs listed above are certainly large, and only the tip of the iceberg.  Therefore, the Court finds $50 per message a reasonable estimation of Plaintiff’s damages.

Liquidated Damages Provision Binding Via An Amendment To Terms Of Service Posted Online

Perhaps most interesting was the Court’s determination that the Globe.com was obligated to pay such liquidated damages even though this provision was not contained in the Terms of Service when defendant first opened accounts with MySpace.  Rather, these terms were added after defendant first commenced its transmission of the email at issue, by being posted to the terms of service on MySpace’s website.   

The Court held that defendant was bound both because the contract advised that ‘you agree to be bound to any changes to this agreement when you use the Service after any such modification is posted’ and because defendant signed up for accounts, and agreed to be bound by MySpace’s terms, after they were revised to contain the new $50 liquidated damages provision.  The Court accordingly held that plaintiff could recover such liquidated damages for each email sent after the provision was posted online.  Said the Court:

[T]he TOS Contract specifically provide[d]: ‘ MySpace.com may modify this agreement from time to time and such modification shall be effective upon posting by MySpace.com on the Website.  You agree to be bound to any changes to this Agreement when you use the Service after any such modification is posted.  For the same reasons stated above, this contractual term is neither procedurally nor substantively unconscionable.  Additionally, the Court notes that Defendant created all 95 MySpace accounts, both before and after March 17, 2006.  Therefore, at the time it created its post-March 17 accounts, it knew, or should have know, that all messages, even those sent from pre-March 17 accounts, were subject to the liquidated damages provision.  As such, the Court finds that the liquidated damages provisions contained in the March 17, 2006 TOS contract applies to all messages sent by Defendant after March 17 2006.

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