E-Commerce Law Week, Issue 518

Third Circuit Strikes Down COPA

The Third Circuit last last month held that the Child Online Protection Act is facially unconstitutional, and therefore may not be enforced.  COPA creates criminal and civil penalties for anyone who knowingly uses "the World Wide Web" to "make[] any communication for commercial purposes that is available to any minor and that includes any material that is harmful to minors."  In American Civil Liberties Union v. Mukasey, the Third Circuit concluded that enforcing COPA would place broad restrictions on the protected speech of adults and be less effective than using filtering software to protect children.  Accordingly, it ruled that COPA "cannot withstand a strict scrutiny, vagueness, or overbreadth analysis and thus is unconstitutional."  Unless reversed, this ruling eliminates a significant liability risk for websites with sexual content.  And given the Supreme Court's previous ruling that COPA likely violates the First Amendment, the Third Circuit's ruling stands a good chance of being upheld.  That means for Congress, it's back to the old drawing board. 

Third Circuit Revives Breach of Contract Claims in Data Breach Case

Another decision last month by the Third Circuit held that two banks that issued Visa credit cards to consumers whose card information was compromised by a data breach at BJ's Wholesale Club can pursue breach of contract claims against Fifth Third Bank, which processed BJ's Visa transactions.  The court reversed a district court decision that the two issuing banks were not third-party beneficiaries of an agreement between Visa and Fifth Third that required Fifth Third to ensure that BJ's not retain cardholder information.  However, the court also held that the "economic loss rule" barred the issuing banks' negligence claims.  While the Third Circuit's rulings on the breach of contract claims mark a win for Sovereign and the Pennsylvania State Employees Credit Union, they will likely do little to improve other plaintiffs' odds of recovering in similar cases involving credit and debit card information.  As the court noted, the Visa Operating Regulations have been amended since the BJ's breach to explicitly preclude third-party beneficiary claims.  This revision to the Operating Regulations led a federal court in Massachusetts to rule in 2007 that a putative class of Visa card issuers could not claim third party beneficiary status in a case arising from the breach of credit card information stored by retailer The TJX Companies, Inc.

In New York, Everyone Will Know You're A Dog

That 1993 New Yorker cartoon about how "On the Internet, Nobody Knows You're A Dog" is increasingly a relic of the past, as governments make it more and more difficult to maintain anonymity on the Web.  The most recent example is a measure signed into law by New York Governor David Paterson that makes it a crime to "impersonate[] another by communication by Internet website or electronic means with intent to obtain a benefit or injure or defraud another, or by such communication [to] pretend[] to be a public servant in order to induce another to submit to such authority or act in reliance on such pretense."  People who use purely fictitious names may not have to give up their pen names just yet, since false impersonation in New York apparently criminalizes only the impersonation of a real person.  (Paterson's predecessor Eliot Spitzer thus might have run afoul of this law had it been in place when he used his friend George Fox's name to book a room at the Mayflower Hotel for an encounter with a prostitute.)  However, in other states, giving a fictitious name does fall within the ambit of false impersonation.  If these states extend the crime of false impersonation to the Internet, even latter day "Fred Flintstones" might be at risk. 

Google Settles American Airlines' Suit Over Trademarked Search Terms

American Airlines has agreed to permanently ground its trademarked search term suit against Google.  The terms of the settlement are confidential (although the parties did stipulate that each would bear its own attorneys fees and costs).  As we previously reported, American filed suit in a federal court in Texas last year, alleging that, by selling airline industry competitors the right to display ads alongside web searches for terms such as "american airlines" and "aa.com," Google directly and indirectly infringed American's trademarks.  Last November, the court denied Google's motion to dismiss without explanation.

Questions and comments about E-Commerce Law Week are always welcome.  Please send your feedback to Sally Albertazzie.