E-Commerce Law Week, Issue 529

Share and Offer to Share Are Not Alike, Court Rules

In a blow to record companies, a federal court in Minnesota recently ruled that merely making copyrighted music available over a file-sharing network, without actual distribution of the music, does not violate a copyright holder’s exclusive right of distribution.  In Capitol Records Inc. v. Thomas, defendant Jammie Thomas challenged a jury's award of more than $200,000 in damages to the record company plaintiffs, which alleged that she had violated their distribution and reproduction rights in music that she made available for sharing over the KaZaA file-sharing network.  The court granted her a new trial, ruling that it had erred in instructing the jury that "[t]he act of making copyrighted sound recordings available for electronic distribution on a peer-to-peer network, without license from the copyright owners, violates the copyright owners’ exclusive right of distribution, regardless of whether actual distribution has been shown."  The court's ruling that an offer to distribute is not a distribution under copyright law is consistent with most federal court decisions, but conflicts with a decision by the Fourth Circuit.

Failure To Allege Damage Dooms Employer's CFAA Claim

A recent ruling by a federal court in Illinois is a mixed bag for companies that use the Computer Fraud and Abuse Act (CFAA) to sue former employees who have pilfered company data on the way out the door.  In Sam's Wines & Liquors, Inc., v. Hartig, the court dismissed Sam's Wines' CFAA claim against former employee Sean Hartig, finding that Sam's had failed to allege that Hartig's use of a password-protected customer list caused damage within the meaning of the CFAA.  But the court also found that the plaintiffs had sufficiently alleged "unauthorized access" and "loss," two other required elements of many CFAA claims.  Moreover, the court's conclusion that a CFAA civil claim requires a showing of both "damage" and "loss" seems questionable, since subsection (g) of the CFAA states that "[a]ny person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator" (emphasis added).  While most courts have allowed similar suits to proceed on the basis of an allegation of loss alone (see, e.g., Frees, Inc., v. McMillian and P.C. of Yonkers, Inc., v. Celebrations! The Party and Seasonal Superstore, L.L.C.), as we previously reported, the Northern District of Illinois has required an allegation of both loss and damage at least once before (see Garelli Wong & Associates, Inc., v. Nichols).

Virgin Media Ordered to Encrypt Mobile Devices After Suffering Data Breach

The UK Information Commissioner's Office (ICO) announced late last month that Virgin Media Limited violated the UK's Data Protection Act 1998 (DPA) when it lost "an unencrypted CD containing the personal details of over three thousand customers."  As a result of this breach, the ICO ordered Virgin Media to sign a formal undertaking that it will encrypt mobile devices and comply with the DPA's Seventh Data Protection Principle.  The undertaking requires Virgin Media to use encryption software which "meets the current standard or equivalent" to encrypt any mobile device used to "store and transmit" personal data that could cause "damage or distress" if lost.  Virgin Media must also ensure that its service providers are contractually obligated to comply with this encryption requirement.  And, pursuant to the Seventh Data Protection Principle, it must take other "appropriate" measures to protect personal data against "unauthorised and unlawful process[ing], accidental loss, destruction, and/or damage." 

Steptoe Presents Chicago Seminar on Unfair Acts and Unfair Competition

On Thursday, October 30, Steptoe partners Charles Schill, Alice Kipel, Stan Schlitter, and Steve Barber will present a free breakfast seminar in Chicago to discuss enforcement of intellectual property rights through Section 337 investigations -- proceedings adjudicated by the United States International Trade Commission that provide companies a means to deal with patent, trademark, and copyright infringement, and other forms of unfair competition.  Registration for the seminar is free, but is on a first-come, first-served basis.  CLE credit is pending for members of the Illinois State Bar.

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