E-Commerce Law Week, Issue 452

Court Finds Some "Click Fraud" May Violate Implicit Covenant of Good Faith

"Click fraud" involves employing individuals or programs (known as "bots") to click on online advertising for the sole purpose of running up the advertiser's pay-per-click charges.  Click fraud is often used to artificially increase the costs of a competitor.  But, in Payday Advance Plus, Inc., v. Findwhat.com, Inc., Payday contended that its contractual partners, search engine Findwhat and co-defendant Advertising.com, used click fraud to line their own pockets.  A federal court in New York found that even if the terms of the contract between Payday and Findwhat did not limit advertising charges to clicks from "actual customers," click fraud would violate a "covenant of good faith and fair dealing in the course of contract performance," which New York recognizes as implicit in every contract.

Utah Creates Liability Trap for Search Engines, Online Advertisers

Utah may be only the 37th most populous U.S. state, but its laws could have a big impact on the way business is done online.  As we've previously reported, a court recently upheld a Utah law that created a "do-not-email" registry for minors -- and potential headaches for commercial emailers.  Now, busy Beehive State lawmakers have enacted a law that creates civil liability for some companies that use a competitor's mark to trigger online advertising, as well as for the search engines and other companies that display such ads.  This could mean big hassles for search engines and online advertisers.  But the law is likely to draw a quick legal challenge, since it threatens one of search engines' most lucrative services and may violate the Dormant Commerce Clause of the U.S. Constitution.

FCC Commences Inquiry into Net Neutrality

"Net neutrality" was a buzzword in Washington, D.C., last year, as a number of Internet heavyweights and consumer groups lobbied Congress to adopt a nondiscrimination principle for the Internet.  While that effort has not (yet) resulted in legislation, on April 16, the Federal Communications Commission stepped into that debate (once again) by releasing a notice of inquiry into broadband industry practices.  This is not the first time that the FCC has sought comment on net-neutrality issues.  Back in 2002, when the FCC first classified cable-modem service as an unregulated "information service" under the Communications Act, it sought comment on whether such discrimination was likely to be an issue.  It has never completed that proceeding.  More recently, when the FCC similarly classified wireline-broadband service as an information service, it issued a non-binding Policy Statement that proclaimed four "net neutrality" principles designed to promote and preserve an "open and interconnected public Internet."  It has also required adherence with those principles as a condition of a number of mergers since then.  But the FCC's latest notice of inquiry is the most direct and focused attempt at addressing these issues.

European Court Decides Human Rights Protect What A Human Writes

It is well-established that monitoring of employee communications is restricted under the law of the EU and its member states, and various other European countries.  But a decision earlier this month has added a new arrow to the quiver of Europeans who wish to attack employee monitoring -- i.e., a claim of violation of the human right of privacy established by Article 8 of the European Convention on Human Rights ("ECHR").  In Copland v. United Kingdom, the European Court of Human Rights considered a claim by Lynette Copland, the personal assistant to the College Principal of Carmarthenshire College in Wales.  As part of her job responsibilities, Ms. Copland also worked with the Deputy Principal of the college, who apparently took an unhealthy interest in her activities, monitoring her emails, telephone calls and Internet usage.  The main explanation that the college proffered for this monitoring was that it was seeking to avoid abuse of its communications facilities, a claim that rang rather hollow considering that Ms. Copland was the only employee who was regularly monitored and that the curious Deputy Principal was later suspended for his conduct.  But even accepting the college's version of events, the Court had little difficulty in concluding that the college's conduct violated Article 8 of the ECHR, and awarded Ms. Copland damages of €3000 and costs of €6000.

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