E-Commerce Law Week, Issue 448

A Loss is A Loss, Of Course, of Course, That Is, Of Course, Unless The Loss Involves the CFAA

Courts have had a difficult time determining what "losses" are compensable in a civil suit brought under the Computer Fraud and Abuse Act (CFAA), reaching inconsistent decisions on whether costs unrelated to damage to a computer are covered.  In P.C. of Yonkers, Inc., v. Celebrations! The Party and Seasonal Superstore, L.L.C., a federal court in New Jersey held that the cost of responding to, investigating, and remedying the defendants' use of a computer to misappropriate trade secrets constituted "loss" within the meaning of the CFAA.  In L-3 Communications Westwood Corp. v. Robicharux, however, a federal court in Louisiana concluded that "loss of trade secrets and lost profits" did not constitute loss within the meaning of the statute unless the loss stemmed from damage to or inoperability of a computer system.  It also suggested in dictum that costs incurred while investigating the loss of trade secrets were not compensable.  Given the confusion in the courts over what losses are recoverable under the CFAA, companies seeking to use that statute to pursue hackers or disloyal former employees would be wise to cite any costs incurred in investigating damage to a computer or losses resulting from the interruption of service, and not just the misappropriation of trade secrets or costs associated with responding to such misappropriation.

State VoIP Regulation -- The Battle Isn't Over

The U.S Court of Appeals for the Eighth Circuit on March 31 upheld the Federal Communications Commission's 2004 Vonage decision preempting state entry and rate regulation of Voice over Internet Protocol (VoIP) services similar to Vonage's Digital Voice service.  The court agreed with the FCC's determination that it was "impractical or impossible to separate the intrastate components of VoIP service from its interstate components" and that state regulation of the intrastate component would conflict with federal regulatory policies.  In reaching their decisions, both the court and the FCC continued to avoid definitively classifying VoIP service as either a "telecommunications service" or "information service" under the Communications Act.

Italian Data Protection Authority Severely Restricts Employer Monitoring of Email

Italy's national data protection authority, the Garante, on March 6 issued a Decree entitled "Employment:  Garante Guidelines for Email and Internet" (the "Guidelines"), which sets out strict limitations on routine employer monitoring of workplace email accounts (even where employees implicitly or explicitly consent to monitoring), as well as preserving existing restrictions on monitoring of employee activities on the Internet.  The Guidelines, which were issued to clarify restrictions under the Italian Data Protection Code, provide that it is "prohibited for private and public employers … to undertake treatment of personal data using hardware and software systems that implement remote controls over workers, in particular through ... the reading and systematic recording of email messages, in particular in relation to external data, except to the extent necessary to provide email service."  There are, however, certain exceptions to this prohibition.  The language of this prohibition itself exempts actions "necessary to provide email service."  The Guidelines also include a separate exception for "unanticipated and prolonged absence" of an employee, in which case emails may be examined where necessary for work-related purposes.  Finally, although the Guidelines do not explicitly say so, Italian case law reportedly permits monitoring of specific employees suspected of wrongdoing.

EU Audiovisual Directive Would Extend Regulation to Internet Video

Earlier this month, the EU took a significant step towards extending regulation of audiovisual services on the Internet by releasing the Draft Audiovisual Media Services Directive ("AVMS Directive").  We have previously described EU plans to regulate online activities by extending the Television Without Frontiers Directive to the Internet.  Last we checked in, the European Commission had introduced a proposal to amend the Directive.  Now, the proposal has been endorsed by the Council of Ministers, has received its first reading in the European Parliament, and has emerged as a proposed new AVMS Directive.  Although the legislation's language has matured and new provisions have been added which narrow the scope of the proposal's impact on Internet services, there continues to be a clear plan for significant new regulation of Internet audiovisual services.

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