E-Commerce

Richard Warner

CompuServe v. Cyber Promotions962 F. Supp. 1015 (S.D. Ohio 1997)

Graham, District Judge.This case presents novel issues regarding the commercial use of the Internet,

specifically the right of an online computer service to prevent a commercial enterprise from sending unsolicited electronic mail advertising to its subscribers.

Plaintiff CompuServe Incorporated ("CompuServe") is one of the major national commercial online computer services. It operates a computer communication service through a proprietary nationwide computer network. In addition to allowing access to the extensive content available within its own proprietary network, CompuServe also provides its subscribers with a link to the much larger resources of the Internet. This allows its subscribers to send and receive electronic messages, known as "e-mail," by the Internet. Defendants Cyber Promotions, Inc. and its president Sanford Wallace are in the business of sending unsolicited e-mail advertisements on behalf of themselves and their clients to hundreds of thousands of Internet users, many of whom are CompuServe subscribers. CompuServe has notified defendants that they are prohibited from using its computer equipment to process and store the unsolicited e-mail and has requested that they terminate the practice. Instead, defendants have sent an increasing volume of e-mail solicitations to CompuServe subscribers. CompuServe has attempted to employ technological means to block the flow of defendants' e-mail transmissions to its computer equipment, but to no avail.

This matter is before the Court on the application of CompuServe for a preliminary injunction which . . . would . . . prevent defendants from sending unsolicited advertisements to CompuServe subscribers.

For the reasons which follow, this Court holds that where defendants engaged in a course of conduct of transmitting a substantial volume of electronic data in the form of unsolicited e-mail to plaintiff's proprietary computer equipment, where defendants continued such practice after repeated demands to cease and desist, and where defendants deliberately evaded plaintiff's affirmative efforts to protect its computer equipment from such use, plaintiff has a viable claim for trespass to personal property and is entitled to injunctive relief to protect its property.

I.

. . . Internet users often pay a fee for Internet access. However, there is no per-message charge to send electronic messages over the Internet and such messages usually reach their destination within minutes. Thus electronic mail provides an opportunity to reach a wide audience quickly and at almost no cost to the sender. It is not surprising therefore that some companies, like defendant Cyber Promotions, Inc., have begun using the Internet to distribute advertisements by sending the same unsolicited commercial message to hundreds of thousands of Internet users at once. Defendants refer to this as "bulk e- mail," while plaintiff refers to it as "junk e-mail." In the vernacular of the Internet, unsolicited e-mail advertising is sometimes referred to pejoratively as "spam."1

CompuServe subscribers use CompuServe's domain name "CompuServe.com" together with their own unique alpha-numeric identifier to form a distinctive e-mail mailing address. That address may be used by the subscriber to exchange electronic mail with any one of tens of millions of other Internet users who have electronic mail capability. E-mail sent to CompuServe subscribers is processed and stored on CompuServe's proprietary computer equipment. Thereafter, it becomes accessible to CompuServe's subscribers, who can access CompuServe's equipment and electronically retrieve those messages.

Over the past several months, CompuServe has received many complaints from subscribers threatening to discontinue their subscription unless CompuServe prohibits electronic mass mailers from using its equipment to send unsolicited advertisements. CompuServe asserts that the volume of messages generated by such mass mailings places a significant burden on its equipment which has finite processing and storage capacity. CompuServe receives no payment from the mass mailers for processing their unsolicited advertising. However, CompuServe's subscribers pay for their access to CompuServe's services in increments of time and thus the process of accessing, reviewing and discarding unsolicited e-mail costs them money, which is one of the reasons for their complaints. CompuServe has notified defendants that they are prohibited from using its proprietary computer equipment to process and store unsolicited e-mail and has requested them to cease and desist from sending unsolicited e-mail to its subscribers. Nonetheless, defendants have sent an increasing volume of e-mail solicitations to CompuServe subscribers.

In an effort to shield its equipment from defendants' bulk e-mail, CompuServe has implemented software programs designed to screen out the messages and block their receipt. In response, defendants have modified their equipment and the messages they send in such a fashion as to circumvent CompuServe's screening software. Allegedly, defendants have been able to conceal the true origin of their messages by falsifying the point-of-origin information contained in the header of the electronic messages. Defendants have removed the "sender" information in the header of their messages and replaced it with another address. Also, defendants have developed the capability of configuring their computer servers to conceal their true domain name and appear on the Internet as another computer, further concealing the true origin of the messages. By manipulating this data, defendants have been able to continue sending messages to CompuServe's equipment in spite of CompuServe's protests and protective efforts.

Defendants assert that they possess the right to continue to send these 1 This term is derived from a skit performed on the British television show Monty Python's Flying Circus, in which the word "spam" is repeated to the point of absurdity in a restaurant menu.

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communications to CompuServe subscribers. CompuServe contends that, in doing so, the defendants are trespassing upon its personal property. . .

IV.This Court will now address the second aspect of plaintiff's motion in which it

seeks to enjoin defendants Cyber Promotions, Inc. and its president Sanford Wallace from sending any unsolicited advertisements to any electronic mail address maintained by CompuServe.

CompuServe predicates this aspect of its motion for a preliminary injunction on the common law theory of trespass to personal property or to chattels, asserting that defendants' continued transmission of electronic messages to its computer equipment constitutes an actionable tort.

The Restatement § 217(b) states that a trespass to chattel may be committed by intentionally using or intermeddling with the chattel in possession of another. Restatement § 217, Comment e defines physical "intermeddling" as follows:

... intentionally bringing about a physical contact with the chattel. The actor may commit a trespass by an act which brings him into an intended physical contact with a chattel in the possession of another[.]

Electronic signals generated and sent by computer have been held to be sufficiently physically tangible to support a trespass cause of action. Thrifty-Tel, Inc., v. Bezenek, 46 Cal.App.4th 1559, 1567, 54 Cal.Rptr.2d 468 (1996); State v. McGraw, 480 N.E.2d 552, 554 (Ind.1985) (Indiana Supreme Court recognizing in dicta that a hacker's unauthorized access to a computer was more in the nature of trespass than criminal conversion); and State v. Riley, 121 Wash.2d 22, 846 P.2d 1365 (1993) (computer hacking as the criminal offense of "computer trespass" under Washington law). It is undisputed that plaintiff has a possessory interest in its computer systems. Further, defendants' contact with plaintiff's computers is clearly intentional. Although electronic messages may travel through the Internet over various routes, the messages are affirmatively directed to their destination.

Defendants, citing Restatement (Second) of Torts § 221, which defines "dispossession", assert that not every interference with the personal property of another is actionable and that physical dispossession or substantial interference with the chattel is required. Defendants then argue that they did not, in this case, physically dispossess plaintiff of its equipment or substantially interfere with it. However, the Restatement (Second) of Torts § 218 defines the circumstances under which a trespass to chattels may be actionable:

One who commits a trespass to a chattel is subject to liability to the possessor of the chattel if, but only if, (a) he dispossesses the other of the chattel, or (b) the chattel is impaired as to its condition, quality, or value, or (c) the possessor is deprived of the use of the chattel for a substantial time,

or (d) bodily harm is caused to the possessor, or harm is caused to some person or thing in which the possessor has a legally protected interest.

Therefore, an interference resulting in physical dispossession is just one circumstance under which a defendant can be found liable. . . .

A plaintiff can sustain an action for trespass to chattels, as opposed to an action for conversion, without showing a substantial interference with its right to possession of that chattel. Thrifty-Tel, Inc., 46 Cal.App.4th at 1567, 54 Cal.Rptr.2d 468 (quoting Zaslow v. Kroenert, 29 Cal.2d 541, 176 P.2d 1 (Cal.1946)). Harm to the personal property or diminution of its quality, condition, or value as a result of

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defendants' use can also be the predicate for liability. Restatement § 218(b). An unprivileged use or other intermeddling with a chattel which results in actual impairment of its physical condition, quality or value to the possessor makes the actor liable for the loss thus caused. In the great majority of cases, the actor's intermeddling with the chattel impairs the value of it to the possessor, as distinguished from the mere affront to his dignity as possessor, only by some impairment of the physical condition of the chattel. There may, however, be situations in which the value to the owner of a particular type of chattel may be impaired by dealing with it in a manner that does not affect its physical condition.... In such a case, the intermeddling is actionable even though the physical condition of the chattel is not impaired.

The Restatement (Second) of Torts § 218, comment h. In the present case, any value CompuServe realizes from its computer

equipment is wholly derived from the extent to which that equipment can serve its subscriber base. . . . handling the enormous volume of mass mailings that CompuServe receives places a tremendous burden on its equipment. . . . Defendants' more recent practice of evading CompuServe's filters by disguising the origin of their messages commandeers even more computer resources because CompuServe's computers are forced to store undeliverable e-mail messages and labor in vain to return the messages to an address that does not exist. . . . To the extent that defendants' multitudinous electronic mailings demand the disk space and drain the processing power of plaintiff's computer equipment, those resources are not available to serve CompuServe subscribers. Therefore, the value of that equipment to CompuServe is diminished even though it is not physically damaged by defendants' conduct.

Next, plaintiff asserts that it has suffered injury aside from the physical impact of defendants' messages on its equipment. Restatement § 218(d) also indicates that recovery may be had for a trespass that causes harm to something in which the possessor has a legally protected interest. Plaintiff asserts that defendants' messages are largely unwanted by its subscribers, who pay incrementally to access their e-mail, read it, and discard it. Also, the receipt of a bundle of unsolicited messages at once can require the subscriber to sift through, at his expense, all of the messages in order to find the ones he wanted or expected to receive. These inconveniences decrease the utility of CompuServe's e-mail service and are the foremost subject in recent complaints from CompuServe subscribers. . . . CompuServe received approximately 9,970 e-mail complaints from subscribers about junk e- mail, a figure up from approximately two hundred complaints the previous year. . . . Approximately fifty such complaints per day specifically reference defendants. . . . Defendants contend that CompuServe subscribers are provided with a simple procedure to remove themselves from the mailing list. However, the removal procedure must be performed by the e-mail recipient at his expense, and some CompuServe subscribers complain that the procedure is inadequate and ineffectual. . . .

Many subscribers have terminated their accounts specifically because of the unwanted receipt of bulk e-mail messages. . . . Defendants' intrusions into CompuServe's computer systems, insofar as they harm plaintiff's business reputation and goodwill with its customers, are actionable under Restatement § 218(d). The reason that the tort of trespass to chattels requires some actual damage as a prima facie element, whereas damage is assumed where there is a trespass to

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real property, can be explained as follows: The interest of a possessor of a chattel in its inviolability, unlike the similar interest of a possessor of land, is not given legal protection by an action for nominal damages for harmless intermeddlings with the chattel. In order that an actor who interferes with another's chattel may be liable, his conduct must affect some other and more important interest of the possessor. Therefore, one who intentionally intermeddles with another's chattel is subject to liability only if his intermeddling is harmful to the possessor's materially valuable interest in the physical condition, quality, or value of the chattel, or if the possessor is deprived of the use of the chattel for a substantial time, or some other legally protected interest of the possessor is affected as stated in Clause (c). Sufficient legal protection of the possessor's interest in the mere inviolability of his chattel is afforded by his privilege to use reasonable force to protect his possession against even harmless interference.

Restatement (Second) of Torts § 218, Comment e (emphasis added). Plaintiff CompuServe has attempted to exercise this privilege to protect its

computer systems. However, defendants' persistent affirmative efforts to evade plaintiff's security measures have circumvented any protection those self-help measures might have provided. In this case CompuServe has alleged and supported by affidavit that it has suffered several types of injury as a result of defendants' conduct. The foregoing discussion simply underscores that the damage sustained by plaintiff is sufficient to sustain an action for trespass to chattels. However, this Court also notes that the implementation of technological means of self-help, to the extent that reasonable measures are effective, is particularly appropriate in this type of situation and should be exhausted before legal action is proper.

Under Restatement § 252, the owner of personal property can create a privilege in the would-be trespasser by granting consent to use the property. A great portion of the utility of CompuServe's e-mail service is that it allows subscribers to receive messages from individuals and entities located anywhere on the Internet. Certainly, then, there is at least a tacit invitation for anyone on the Internet to utilize plaintiff's computer equipment to send e-mail to its subscribers. Buchanan Marine, Inc. v. McCormack Sand Co., 743 F.Supp. 139 (E.D.N.Y.1990) (whether there is consent to community use is a material issue of fact in an action for trespass to chattels). However, in or around October 1995, CompuServe employee Jon Schmidt specifically told Mr. Wallace that he was "prohibited from using CompuServe's equipment to send his junk e-mail messages." . . . There is apparently some factual dispute as to this point, but it is clear from the record that Mr. Wallace became aware at about this time that plaintiff did not want to receive messages from Cyber Promotions and that plaintiff was taking steps to block receipt of those messages. . . .

Defendants argue that plaintiff made the business decision to connect to the Internet and that therefore it cannot now successfully maintain an action for trespass to chattels. Their argument is analogous to the argument that because an establishment invites the public to enter its property for business purposes, it cannot later restrict or revoke access to that property, a proposition which is erroneous under Ohio law. See, e.g., State v. Carriker, 5 Ohio App.2d 255, 214 N.E.2d 809 (1964) (the law in Ohio is that a business invitee's privilege to remain on the premises of another may be revoked upon the reasonable notification to leave by the owner or his agents); Allstate Ins. Co. v. U.S. Associates Realty, Inc., 11 Ohio

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App.3d 242, 464 N.E.2d 169 (1983) (notice of express restriction or limitation on invitation turns business invitee into trespasser). On or around October 1995, CompuServe notified defendants that it no longer consented to the use of its proprietary computer equipment. Defendants' continued use thereafter was a trespass. Restatement (Second) of Torts §§ 252 and 892A(5); see also Restatement (Second) of Torts § 217, Comment f ("The actor may commit a new trespass by continuing an intermeddling which he has already begun, with or without the consent of the person in possession. Such intermeddling may persist after the other's consent, originally given, has been terminated."); Restatement (Second) of Torts § 217, Comment g.

Further, CompuServe expressly limits the consent it grants to Internet users to send e-mail to its proprietary computer systems by denying unauthorized parties the use of CompuServe equipment to send unsolicited electronic mail messages. . . . This policy statement, posted by CompuServe online, states as follows:

Compuserve is a private online and communications services company. CompuServe does not permit its facilities to be used by unauthorized parties to process and store unsolicited e-mail. If an unauthorized party attempts to send unsolicited messages to e-mail addresses on a CompuServe service, Compuserve will take appropriate action to attempt to prevent those messages from being processed by CompuServe. Violations of CompuServe's policy prohibiting unsolicited e-mail should be reported to....

Defendants Cyber Promotions, Inc. and its president Sanford Wallace have used plaintiff's equipment in a fashion that exceeds that consent. The use of personal property exceeding consent is a trespass. City of Amsterdam v. Daniel Goldreyer, Ltd., 882 F.Supp. 1273 (E.D.N.Y.1995); Restatement (Second) of Torts § 256. It is arguable that CompuServe's policy statement, insofar as it may serve as a limitation upon the scope of its consent to the use of its computer equipment, may be insufficiently communicated to potential third-party users when it is merely posted at some location on the network. However, in the present case the record indicates that defendants were actually notified that they were using CompuServe's equipment in an unacceptable manner. To prove that a would-be trespasser acted with the intent required to support liability in tort it is crucial that defendant be placed on notice that he is trespassing.

As a general matter, the public possesses a privilege to reasonably use the facilities of a public utility, Restatement (Second) of Torts § 259, but Internet service providers have been held not to be common carriers. Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F.Supp. 1361 (N.D.Cal.1995). The definition of public utility status under Ohio law was recently articulated in A & B Refuse Disposers, Inc. v. Bd. Of Ravenna Township Trustees, 64 Ohio St.3d 385, 596 N.E.2d 423 (1992). The Ohio Supreme Court held that the determination of whether an entity is a "public utility" requires consideration of several factors relating to the "public service" and "public concern" characteristics of a public utility. Id. 596 N.E.2d at 426. The public service characteristic contemplates an entity which devotes an essential good or service to the general public which the public in turn has a legal right to demand or receive. Id. at 425. CompuServe's network, Internet access and electronic mail services are simply not essential to society. There are many alternative forms of communication which are customarily used for the same purposes. Further, only a minority of society at large has the equipment to send and receive e-mail messages via the Internet, and even fewer actually do. The second characteristic of a public utility contemplates an

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entity which conducts its operations in such manner as to be a matter of public concern, that is, a public utility normally occupies a monopolistic or ogopolistic position in the relevant marketplace. Id. at 425-426. Defendants estimate that plaintiff serves some five million Internet users worldwide. However, there are a number of major Internet service providers that have very large subscriber bases, and with a relatively minor capital investment, anyone can acquire the computer equipment necessary to provide Internet access services on a smaller scale. Furthermore, Internet users are not a "captive audience" to any single service provider, but can transfer from one service to another until they find one that best suits their needs. Finally, the Ohio Supreme Court made clear that a party asserting public utility status is required to support that assertion with evidence going to the relevant aforementioned factors. Id. 596 N.E.2d at 427. Defendants have not argued that CompuServe is a public utility, much less produced evidence tending to support such a conclusion. Therefore, CompuServe is not a public utility as that status is defined under Ohio law and defendants can not be said to enjoy a special privilege to use CompuServe's proprietary computer systems.

In response to the trespass claim, defendants argue that they have the right to continue to send unsolicited commercial e-mail to plaintiff's computer systems under the First Amendment to the United States Constitution. The First Amendment states that "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press." The United States Supreme Court has recognized that "the constitutional guarantee of free speech is a guarantee only against abridgement by government, federal or state." Hudgens v. NLRB, 424 U.S. 507, 513, 96 S.Ct. 1029, 1033, 47 L.Ed.2d 196 (1976). Indeed, the protection of the First Amendment is not a shield against "merely private conduct." Hurley v. Irish-American Gay Group of Boston, 515 U.S. 557, ----, 115 S.Ct. 2338, 2344, 132 L.Ed.2d 487 (1995) (citation omitted).. . .

In the present action, CompuServe is a private company. Moreover, the mere judicial enforcement of neutral trespass laws by the private owner of property does not alone render it a state actor. Rotunda & Nowak, Treatise on Constitutional Law § 16.3, 546 (West 1992). Defendants do not argue that CompuServe is anything other than a private actor. Instead, defendants urge that because CompuServe is so intimately involved in this new medium it might be subject to some special form of regulation. Defendants cite Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945), and Turner Broadcasting Sys., Inc. v. FCC, 512 U.S. 622, 114 S.Ct. 2445, 129 L.Ed.2d 497 (1994), which stand for the proposition that when a private actor has a certain quantum of control over a central avenue of communication, then the First Amendment might not prevent the government from enacting legislation requiring public access to private property. No such legislation yet exists that is applicable to CompuServe. Further, defendants' discussion concerning the extent to which the Internet may be regulated (or should be regulated) is irrelevant because no government entity has undertaken to regulate the Internet in a manner that is applicable to this action. Indeed, if there were some applicable statutory scheme in place this Court would not be required to apply paradigms of common law to the case at hand.

In Lloyd Corp. v. Tanner, 407 U.S. 551, 92 S.Ct. 2219, 33 L.Ed.2d 131 (1972), protestors of the Vietnam War sought to pass out written materials in a private shopping center. Even though the customers of the shopping center were the

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intended recipients of the communication, the Supreme Court held that allowing the First Amendment to trump private property rights is unwarranted where there are adequate alternative avenues of communication. Id. at 567, 92 S.Ct. at 2228. The Supreme Court stated that:

Although ... the courts properly have shown a special solicitude for the guarantees of the First Amendment, this Court has never held that a trespasser or an uninvited guest may exercise general rights of free speech on property privately owned and used nondiscriminatorily for private purposes only.

Id. at 567-68, 92 S.Ct. at 2228 (emphasis added). Defendants in the present action have adequate alternative means of communication available to them. Not only are they free to send e-mail advertisements to those on the Internet who do not use CompuServe accounts, but they can communicate to CompuServe subscribers as well through online bulletin boards, web page advertisements, or facsimile transmissions, as well as through more conventional means such as the U.S. mail or telemarketing. Defendants' contention, referring to the low cost of the electronic mail medium, that there are no adequate alternative means of communication is unpersuasive. There is no constitutional requirement that the incremental cost of sending massive quantities of unsolicited advertisements must be borne by the recipients. The legal concept in Lloyd that private citizens are entitled to enforce laws of trespass against would-be communicators is applicable to this case.

Defendants assert that CompuServe has assumed the role of a postmaster, to whom all of the strictures of the First Amendment apply, and that to allow it to enjoy a legally protected interest in its computer equipment in this context is to license a form of censorship which violates the First Amendment. However, such an assertion must be accompanied by a showing that CompuServe is a state actor. As earlier mentioned, defendants have neither specifically argued this point nor provided any evidence to support it. CompuServe is entitled to restrict access to its private property. "The First and Fourteenth Amendments have never been treated as absolutes. Freedom of speech or press does not mean that one can talk or distribute where, when and how one chooses." Breard v. City of Alexandria, 341 U.S. 622, 642, 71 S.Ct. 920, 932, 95 L.Ed. 1233 (1951) (upholding local ordinances banning commercial solicitations over First Amendment objections) (footnote omitted). In Rowan v. U.S. Post Office Dept., 397 U.S. 728, 90 S.Ct. 1484, 25 L.Ed.2d 736 (1970) the United States Supreme Court held that the First Amendment did not forbid federal legislation that allowed addressees to remove themselves from mailing lists and stop all future mailings. The Court stated that the "mailer's right to communicate must stop at the mailbox of an unreceptive addressee.... [t]o hold less would be to license a form of trespass [.]" Id. at 736-37, 90 S.Ct. at 1490.

In Tillman v. Distribution Sys. Of America, Inc., 224 A.D.2d 79, 648 N.Y.S.2d 630 (1996) the plaintiff complained that the defendant continued to throw newspapers on his property after being warned not to do so. The court held that the defendant newspaper distributor had no First Amendment right to continue to throw newspapers onto the property of the plaintiff. After discussing the Supreme Court cases of Rowan and Breard, supra, the court pointed out that:

The most critical and fundamental distinction between the cases cited above, on the one hand, and the present case, on the other, is based on the fact that here we are not dealing with a government agency which seeks to preempt in some way the ability of a publisher to contact a potential reader; rather, we

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are dealing with a reader who is familiar with a publisher's product, and who is attempting to prevent the unwanted dumping of this product on his property. None of the cases cited by the defendants stands for the proposition that the Free Speech Clause prohibits such a landowner from resorting to his common-law remedies in order to prevent such unwanted dumping. There is, in our view, nothing in either the Federal or State Constitutions which requires a landowner to tolerate a trespass whenever the trespasser is a speaker, or the distributor of written speech, who is unsatisfied with the fora which may be available on public property, and who thus attempts to carry his message to private property against the will of the owner.

Id. 648 N.Y.S.2d at 635. The court concluded, relying on Lloyd, supra, that the property rights of the private owner could not be overwhelmed by the First Amendment. Id. 648 N.Y.S.2d at 636.

In the present case, plaintiff is physically the recipient of the defendants' messages and is the owner of the property upon which the transgression is occurring. As has been discussed, plaintiff is not a government agency or state actor which seeks to preempt defendants' ability to communicate but is instead a private actor trying to tailor the nuances of its service to provide the maximum utility to its customers.

Defendants' intentional use of plaintiff's proprietary computer equipment exceeds plaintiff's consent and, indeed, continued after repeated demands that defendants cease. Such use is an actionable trespass to plaintiff's chattel. The First Amendment to the United States Constitution provides no defense for such conduct.

Plaintiff has demonstrated a likelihood of success on the merits which is sufficient to warrant the issuance of the preliminary injunction it has requested. . . .

Normally, a preliminary injunction is not appropriate where an ultimate award of monetary damages will suffice. Montgomery v. Carr, 848 F.Supp. 770 (S.D.Ohio 1993). However, money damages are only adequate if they can be reasonably computed and collected. Plaintiff has demonstrated that defendants' intrusions into their computer systems harm plaintiff's business reputation and goodwill. This is the sort of injury that warrants the issuance of a preliminary injunction because the actual loss is impossible to compute. Basicomputer Corp. v. Scott, 973 F.2d 507 (6th Cir.1992); Economou v. Physicians Weight Loss Centers of America, 756 F.Supp. 1024 (N.D.Ohio 1991).

Plaintiff has shown that it will suffer irreparable harm without the grant of the preliminary injunction.

It is improbable that granting the injunction will cause substantial harm to defendant. Even with the grant of this injunction, defendants are free to disseminate their advertisements in other ways not constituting trespass to plaintiff's computer equipment. Further, defendants may continue to send electronic mail messages to the tens of millions of Internet users who are not connected through CompuServe's computer systems.

Finally, the public interest is advanced by the Court's protection of the common law rights of individuals and entities to their personal property. Defendants raise First Amendment concerns and argue that an injunction will adversely impact the public interest. High volumes of junk e-mail devour computer processing and storage capacity, slow down data transfer between computers over the Internet by congesting the electronic paths through which the messages travel, and cause recipients to spend time and money wading through messages that they do not

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want. It is ironic that if defendants were to prevail on their First Amendment arguments, the viability of electronic mail as an effective means of communication for the rest of society would be put at risk. In light of the foregoing discussion, those arguments are without merit. Further, those subscribing to CompuServe are not injured by the issuance of this injunction. Plaintiff has made a business decision to forbid Cyber Promotions and Mr. Wallace from using its computers to transmit messages to CompuServe subscribers. If CompuServe subscribers are unhappy with that decision, then they may make that known, perhaps by terminating their accounts and transferring to an Internet service provider which accepts unsolicited e- mail advertisements. That is a business risk which plaintiff has assumed. Having considered the relevant factors, this Court concludes that the preliminary injunction that plaintiff requests is appropriate.

Notes and Questions1. You commit trespass to chattels by intentionally and without authorization

disposssing someone of personal property or use the property. See RESTATEMENT (SECOND) OF TORTS § 217(b), and §§ 252 and 892(5), 217, Comment f and Comment g). Now consider § 218, which says that you are liable for trespass to chattels if and only if: (a) you dispossess someone of the chattel; or (b) you impair the value of the chattel; or (c) you deprive the possessor of the use of the chattel for a substantial time; or (d) you cause bodily harm to the possess, or harm some other person or thing in which the possessor has a legally protected interest.

Why does the RESTATEMENT distinguish between “committing trespass” and “liability” for trespass? By “liability” does the RESTATEMENT mean liability for monetary damages, or does § 218 apply to injunctions as well? The questions become critical outside the spam e-mail context. The questions raised in (2) and (3) below also become critical.

2. The court found that Cyber Promotions’ sending massive amounts of e-mail to CompuServe was an intentional unauthorized use of CompuServe’s computers, where (1) the use impaired their value even though the computers were not physically harmed, and (2) harmed a legally protected interest CompuServe had in those computers by causing CompuServe’s customers to terminate their accounts and by damaging its business reputation and goodwill.

In general, what is required for an impairment of value and for a harm to an appropriate legally protected interest?

3. The court issues an injunction against Cyber Promotions because CompuServe demonstrated that Cyber Promotions’ unauthorized access harmed CompuServe’s business reputation and goodwill. The court noted that an injunction was appropriate because the actual loss would be impossible to calculate.

In general, what sort of injury, if any, is required for an injunction to issue based on a claim of trespass to chattels?

4. Trespass to chattels is not the only legal doctrine invoked against spammers. Cases are also brought under the Computer Fraud and Abuse Act, 18 U. S. C. 47, Sec. 1030.

eBay, Inc. v. Bidder's Edge, Inc.100 F.Supp.2d 1058 (N.D. Cal. 2000)

Whyte, District Judge.

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Plaintiff eBay, Inc.'s (“eBay”) motion for preliminary injunction was heard by the court on April 14, 2000. . . . For the reasons set forth below, the court preliminarily enjoins defendant Bidder's Edge, Inc. (“BE”) from accessing eBay's computer systems by use of any automated querying program without eBay's written authorization.I. BACKGROUNDeBay is an Internet-based, person-to-person trading site. eBay offers sellers the ability to list items for sale and prospective buyers the ability to search those listings and bid on items. The seller can set the terms and conditions of the auction. The item is sold to the highest bidder. The transaction is consummated directly between the buyer and seller without eBay's involvement. A potential purchaser looking for a particular item can access the eBay site and perform a key word search for relevant auctions and bidding status. eBay has also created category listings that identify items in over 2500 categories, such as antiques, computers, and dolls. Users may browse these category listing pages to identify items of interest. Users of the eBay site must register and agree to the eBay User Agreement. Users agree to the seven page User Agreement by clicking on an “I Accept” button located at the end of the User Agreement. The current version of the User Agreement prohibits the use of “any robot, spider, other automatic device, or manual process to monitor or copy our web pages or the content contained herein without our prior expressed written permission.” It is not clear that the version of the User Agreement in effect at the time BE began searching the eBay site prohibited such activity, or that BE ever agreed to comply with the User Agreement.eBay currently has over 7 million registered users. Over 400,000 new items are added to the site every day. Every minute, 600 bids are placed on almost 3 million items. Users currently perform, on average, 10 million searches per day on eBay's database. Bidding for and sales of items are continuously ongoing in millions of separate auctions. A software robot is a computer program which operates across the Internet to perform searching, copying and retrieving functions on the web sites of others. A software robot is capable of executing thousands of instructions per minute, far in excess of what a human can accomplish. Robots consume the processing and storage resources of a system, making that portion of the system's capacity unavailable to the system owner or other users. Consumption of sufficient system resources will slow the processing of the overall system and can overload the system such that it will malfunction or “crash.” A severe malfunction can cause a loss of data and an interruption in services. The eBay site employs “robot exclusion headers.” A robot exclusion header is a message, sent to computers programmed to detect and respond to such headers, that eBay does not permit unauthorized robotic activity. Programmers who wish to comply with the Robot Exclusion Standard design their robots to read a particular data file, “robots.txt,” and to comply with the control directives it contains. To enable computers to communicate with each other over the Internet, each is assigned a unique Internet Protocol (“IP”) address. When a computer requests information from another computer over the Internet, the requesting computer must offer its IP address to the responding computer in order to allow a response to be sent. These IP addresses allow the identification of the source of incoming requests. eBay identifies robotic activity on its site by monitoring the number of

11

incoming requests from each particular IP address. Once eBay identifies an IP address believed to be involved in robotic activity, an investigation into the identity, origin and owner of the IP address may be made in order to determine if the activity is legitimate or authorized. If an investigation reveals unauthorized robotic activity, eBay may attempt to ignore (“block”) any further requests from that IP address. Attempts to block requests from particular IP addresses are not always successful. . . . Blocking queries . . . is both inefficient, because it creates an endless game of hide-and-seek, and potentially counterproductive, as it runs a substantial risk of blocking requests from legitimate, desirable users . . . BE . . . does not host auctions. BE is an auction aggregation site designed to offer on-line auction buyers the ability to search for items across numerous on-line auctions without having to search each host site individually. As of March 2000, the BE web site contained information on more that five million items being auctioned on more than one hundred auction sites. BE also provides its users with additional auction-related services and information. The information available on the BE site is contained in a database of information that BE compiles through access to various auction sites such as eBay. When a user enters a search for a particular item at BE, BE searches its database and generates a list of every item in the database responsive to the search, organized by auction closing date and time. Rather than going to each host auction site one at a time, a user who goes to BE may conduct a single search to obtain information about that item on every auction site tracked by BE. It is important to include information regarding eBay auctions on the BE site because eBay is by far the biggest consumer to consumer on-line auction site. . . . In early 1998, eBay gave BE permission to include information regarding eBay-hosted auctions for Beanie Babies and Furbies in the BE database. In early 1999, BE added to the number of person-to-person auction sites it covered and started covering a broader range of items hosted by those sites, including eBay. On April 24, 1999, eBay verbally approved BE crawling the eBay web site for a period of 90 days. The parties contemplated that during this period they would reach a formal licensing agreement. They were unable to do so.It appears that the primary dispute was over the method BE uses to search the eBay database. eBay wanted BE to conduct a search of the eBay system only when the BE system was queried by a BE user. This reduces the load on the eBay system and increases the accuracy of the BE data. BE wanted to recursively crawl the eBay system to compile its own auction database. This increases the speed of BE searches and allows BE to track the auctions generally and automatically update its users when activity occurs in particular auctions, categories of auctions, or when new items are added. In late August or early September 1999, eBay requested by telephone that BE cease posting eBay auction listings on its site. BE agreed to do so. In October 1999, BE learned that other auction aggregations sites were including information regarding eBay auctions. On November 2, 1999, BE issued a press release indicating that it had resumed including eBay auction listings on its site. On November 9, 1999, eBay sent BE a letter reasserting that BE's activities were unauthorized, insisting that BE cease accessing the eBay site, alleging that BE's activities constituted a civil trespass and offering to license BE's activities. eBay and BE were again unable to agree on licensing terms. As a result, eBay attempted to block BE from accessing the eBay site; by the end of November, 1999, eBay had blocked a total of 169 IP addresses it believed BE was using to query eBay's system. BE elected to continue

12

crawling eBay's site by using proxy servers to evade eBay's IP blocks. Approximately 69% of the auction items contained in the BE database are from auctions hosted on eBay. BE estimates that it would lose one-third of its users if it ceased to cover the eBay auctions. The parties agree that BE accessed the eBay site approximate 100,000 times a day. eBay alleges that BE activity constituted up to 1.53% of the number of requests received by eBay, and up to 1.10% of the total data transferred by eBay during certain periods in October and November of 1999. . . . II. LEGAL STANDARDTo obtain preliminary injunctive relief, a movant must demonstrate “either a likelihood of success on the merits and the possibility of irreparable injury, or that serious questions going to the merits were raised and the balance of hardships tips sharply in its favor.” Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510, 1517 (9th Cir.1992) (citations omitted). The alternatives in the above standard represent “extremes of a single continuum,” rather than two separate tests. Benda v. Grand Lodge of Int'l Ass'n of Machinists & Aerospace Workers, 584 F.2d 308, 315 (9th Cir.1978). “The critical element in determining the test to be applied is the relative hardship to the parties. If the balance of harm tips decidedly toward the plaintiff, then the plaintiff need not show as robust a likelihood of success on the merits as when the balance tips less decidedly.” Alaska v. Native Village of Venetie, 856 F.2d 1384, 1389 (9th Cir.1988). A “serious question” is one on which the movant has a “fair chance of success on the merits.” Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1421 (9th Cir.1984). Generally, the “balance of harm” evaluation should precede the “likelihood of success analysis” because until the balance of harm has been evaluated the court cannot know how strong and substantial the plaintiff's showing of the likelihood of success must be. See Village of Venetie, 856 F.2d at 1389.III. ANALYSISA. Balance of HarmeBay asserts that it will suffer four types of irreparable harm if preliminary injunctive relief is not granted: (1) lost capacity of its computer systems resulting from to BE's use of automated agents; (2) damage to eBay's reputation and goodwill caused by BE's misleading postings; (3) dilution of the eBay mark; and (4) BE's unjust enrichment. The harm eBay alleges it will suffer can be divided into two categories. The first type of harm is harm that eBay alleges it will suffer as a result of BE's automated query programs burdening eBay's computer system (“system harm”). The second type of harm is harm that eBay alleges it will suffer as a result of BE's misrepresentations regarding the information that BE obtains through the use of these automated query programs (“reputational harm”).. . . Since eBay does not move independently or alternatively for injunctive relief tailored toward the alleged reputational harm, the court does not include the alleged reputational harm in the balance of harm analysis, nor does the court address the merits of the causes of action based on the alleged reputational harm in the likelihood of success analysis.According to eBay, the load on its servers resulting from BE's web crawlers represents between 1.11% and 1.53% of the total load on eBay's listing servers. eBay alleges both economic loss from BE's current activities and potential harm resulting from the total crawling of BE and others. . . .eBay's allegations of harm are based, in part, on the argument that BE's activities should be thought of as equivalent to sending in an army of 100,000 robots a day to

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check the prices in a competitor's store. This analogy, while graphic, appears inappropriate. Although an admittedly formalistic distinction, unauthorized robot intruders into a “brick and mortar” store would be committing a trespass to real property. There does not appear to be any doubt that the appropriate remedy for an ongoing trespass to business premises would be a preliminary injunction. See e.g., State v. Carriker, 5 Ohio App.2d 255, 214 N.E.2d 809, 811-12 (1964) (interpreting Ohio criminal trespass law to cover a business invitee who, with no intention of making a purchase, uses the business premises of another for his own gain after his invitation has been revoked); General Petroleum Corp. v. Beilby, 213 Cal. 601, 605, 2 P.2d 797 (1931). More importantly, for the analogy to be accurate, the robots would have to make up less than two out of every one-hundred customers in the store, the robots would not interfere with the customers' shopping experience, nor would the robots even be seen by the customers. Under such circumstances, there is a legitimate claim that the robots would not pose any threat of irreparable harm. However, eBay's right to injunctive relief is also based upon a much stronger argument.If BE's activity is allowed to continue unchecked, it would encourage other auction aggregators to engage in similar recursive searching of the eBay system such that eBay would suffer irreparable harm from reduced system performance, system unavailability, or data losses. BE does not appear to seriously contest that reduced system performance, system unavailability or data loss would inflict irreparable harm on eBay consisting of lost profits and lost customer goodwill. Harm resulting from lost profits and lost customer goodwill is irreparable because it is neither easily calculable, nor easily compensable and is therefore an appropriate basis for injunctive relief. See, e.g., People of California ex rel. Van De Kamp v. Tahoe Reg'l Planning Agency, 766 F.2d 1316, 1319 (9th Cir.1985). Where, as here, the denial of preliminary injunctive relief would encourage an increase in the complained of activity, and such an increase would present a strong likelihood of irreparable harm, the plaintiff has at least established a possibility of irreparable harm. In the patent infringement context, the Federal Circuit has held that a preliminary injunction may be based, at least in part, on the harm that would occur if a preliminary injunction were denied and infringers were thereby encouraged to infringe a patent during the course of the litigation. See Atlas Powder Co. v. Ireco Chemicals, 773 F.2d 1230, 1233 (Fed.Cir.1985). In the absence of preliminary injunctive relief, “infringers could become compulsory licensees for as long as the litigation lasts.” Id. The Federal Circuit's reasoning is persuasive. “The very nature of the patent right is the right to exclude others.... We hold that where validity and continuing infringement have been clearly established, as in this case, immediate irreparable harm is presumed. To hold otherwise would be contrary to the public policy underlying the patent laws.” Smith Int'l, Inc. v. Hughes Tool Co., 718 F.2d 1573, 1581 (Fed.Cir.1983) (footnotes omitted). Similarly fundamental to the concept of ownership of personal property is the right to exclude others. See Kaiser Aetna v. United States, 444 U.S. 164, 176, 100 S.Ct. 383, 62 L.Ed.2d 332 (1979) (characterizing “the right to exclude others” as “one of the most essential sticks in the bundle of rights that are commonly characterized as property”). If preliminary injunctive relief against an ongoing trespass to chattels were unavailable, a trespasser could take a compulsory license to use another's personal property for as long as the trespasser could perpetuate the litigation.BE correctly observes that there is a dearth of authority supporting a preliminary injunction based on an ongoing to trespass to chattels. In contrast, it is black letter

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law in California that an injunction is an appropriate remedy for a continuing trespass to real property. See Allred v. Harris, 14 Cal.App.4th 1386, 1390, 18 Cal.Rptr.2d 530 (1993) (citing 5 B.E. Witkin, Summary of California Law, Torts § 605 (9th ed.1988)). If eBay were a brick and mortar auction house with limited seating capacity, eBay would appear to be entitled to reserve those seats for potential bidders, to refuse entrance to individuals (or robots) with no intention of bidding on any of the items, and to seek preliminary injunctive relief against non-customer trespassers eBay was physically unable to exclude. The analytic difficulty is that a wrongdoer can commit an ongoing trespass of a computer system that is more akin to the traditional notion of a trespass to real property, than the traditional notion of a trespass to chattels, because even though it is ongoing, it will probably never amount to a conversion. The court concludes that under the circumstances present here, BE's ongoing violation of eBay's fundamental property right to exclude others from its computer system potentially causes sufficient irreparable harm to support a preliminary injunction.BE argues that even if eBay is entitled to a presumption of irreparable harm, the presumption may be rebutted. The presumption may be rebutted by evidence that a party has engaged in a pattern of granting licenses to engage in the complained of activity such that it may be reasonable to expect that invasion of the right can be recompensed with a royalty rather than with an injunction, or by evidence that a party has unduly delayed in bringing suit, thereby negating the idea of irreparability. See Polymer Technologies, Inc. v. Bridwell, 103 F.3d 970, 974 (Fed.Cir.1996) (discussing presumption of irreparable harm in patent infringement context). BE alleges that eBay has both engaged in a pattern of licensing aggregators to crawl its site as well as delayed in seeking relief. For the reasons set forth below, the court finds that neither eBay's limited licensing activities nor its delay in seeking injunctive relief while it attempted to resolve the matter without judicial intervention are sufficient to rebut the possibility of irreparable harm.If eBay's irreparable harm claim were premised solely on the potential harm caused by BE's current crawling activities, evidence that eBay had licensed others to crawl the eBay site would suggest that BE's activity would not result in irreparable harm to eBay. However, the gravamen of the alleged irreparable harm is that if BE is allowed to continue to crawl the eBay site, it may encourage frequent and unregulated crawling to the point that eBay's system will be irreparably harmed. There is no evidence that eBay has indiscriminately licensed all comers. Rather, it appears that eBay has carefully chosen to permit crawling by a limited number of aggregation sites that agree to abide by the terms of eBay's licensing agreement. “The existence of such a [limited] license, unlike a general license offered to all comers, does not demonstrate a decision to relinquish all control over the distribution of the product in exchange for a readily computable fee.” Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167, 1173 (7th Cir.1997) (discussing presumption of irreparable harm in copyright infringement context). eBay's licensing activities appear directed toward limiting the amount and nature of crawling activity on the eBay site. Such licensing does not support the inference that carte blanche crawling of the eBay site would pose no threat of irreparable harm.eBay first learned of BE in late 1997 or early 1998 when BE sought to retain the same public relations firm used by eBay. This motion was filed on January 18, 2000. An unexplained delay of two years would certainly raise serious doubts as the irreparability of any alleged harm. See Playboy Enters., Inc. v. Netscape Communications Corp., 55 F.Supp.2d 1070, 1090 (C.D.Cal.1999) (noting that delay

15

of as little as 60 days to three months has been held sufficient to rebut the presumption of irreparable harm). Here, the circumstances establish that any delay resulted from eBay's good faith efforts to resolve this dispute without judicial intervention and do not rebut a finding of the possibility of irreparable harm.In April 1999, eBay agreed to allow BE to crawl the eBay site for 90 days while the parties negotiated a license. In late August or early September 1999, after the parties had failed to negotiate a license, eBay requested that BE stop crawling the eBay site, and BE complied. It was not until November 2, 1999, that BE issued a press release indicating that it had resumed including eBay auction listings on its site. In response, on November 9, 1999, eBay sent BE a letter again informing BE that its activities were unauthorized and again offering to license BE's activities.1 After eBay and BE were again unable to agree on licensing terms, eBay attempted to block BE from accessing the eBay site. By the end of November 1999, despite blocking more than 150 IP addresses, it became apparent that eBay was unable to prevent BE's crawling of the eBay system via rotating proxy servers. Having failed in its attempt at self-help, eBay filed this suit on December 10, 1999, and filed this motion five weeks later. The fact that eBay's primary concern is the threat from the likely increase in crawling activity that would result if BE is allowed to continue its unauthorized conduct, combined with eBay's repeated attempts to resolve this dispute without judicial intervention, and BE's continuing attempts to thwart eBay's protection of its property, convinces the court that eBay's delay in seeking preliminary relief was justified. BE argues that even if eBay will be irreparably harmed if a preliminary injunction is not granted, BE will suffer greater irreparable harm if an injunction is granted. According to BE, lack of access to eBay's database will result in a two-thirds decrease in the items listed on BE, and a one-eighth reduction in the value of BE, from $80 million to $70 million. Although the potential harm to BE does not appear insignificant, BE does not appear to have suffered any irreparable harm during the period it voluntarily ceased crawling the eBay site. Barring BE from automatically querying eBay's site does not prevent BE from maintaining an aggregation site including information from eBay's site. Any potential economic harm is appropriately addressed through the posting of an adequate bond.. . .B. Likelihood of Success. . . The court finds that eBay has established a sufficient likelihood of prevailing on the trespass claim to support the requested injunctive relief. . . .1. TrespassTrespass to chattels “lies where an intentional interference with the possession of personal property has proximately cause injury.” Thrifty-Tel v. Bezenek, 46 Cal.App.4th 1559, 1566, 54 Cal.Rptr.2d 468 (1996). Trespass to chattels “although seldom employed as a tort theory in California” was recently applied to cover the unauthorized use of long distance telephone lines. Id. Specifically, the court noted “the electronic signals generated by the [defendants'] activities were sufficiently tangible to support a trespass cause of action.” Id. at n. 6. Thus, it appears likely that the electronic signals sent by BE to retrieve information from eBay's computer system are also sufficiently tangible to support a trespass cause of action.In order to prevail on a claim for trespass based on accessing a computer system, the plaintiff must establish: (1) defendant intentionally and without authorization interfered with plaintiff's possessory interest in the computer system; and (2) defendant's unauthorized use proximately resulted in damage to plaintiff. See

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Thrifty-Tel, 46 Cal.App.4th at 1566, 54 Cal.Rptr.2d 468; see also Itano v. Colonial Yacht Anchorage, 267 Cal.App.2d 84, 90, 72 Cal.Rptr. 823 (1968) (“When conduct complained of consists of intermeddling with personal property ‘the owner has a cause of action for trespass or case, and may recover only the actual damages suffered by reason of the impairment of the property or the loss of its use.’ ”) (quoting Zaslow v. Kroenert, 29 Cal.2d 541, 550, 176 P.2d 1 (1946)). Here, eBay has presented evidence sufficient to establish a strong likelihood of proving both prongs and ultimately prevailing on the merits of its trespass claim.a. BE's Unauthorized InterferenceeBay argues that BE's use was unauthorized and intentional. eBay is correct. BE does not dispute that it employed an automated computer program to connect with and search eBay's electronic database. BE admits that, because other auction aggregators were including eBay's auctions in their listing, it continued to “crawl” eBay's web site even after eBay demanded BE terminate such activity.BE argues that it cannot trespass eBay's web site because the site is publicly accessible. BE's argument is unconvincing. eBay's servers are private property, conditional access to which eBay grants the public. eBay does not generally permit the type of automated access made by BE. In fact, eBay explicitly notifies automated visitors that their access is not permitted. “In general, California does recognize a trespass claim where the defendant exceeds the scope of the consent.” Baugh v. CBS, Inc., 828 F.Supp. 745, 756 (N.D.Cal.1993).Even if BE's web crawlers were authorized to make individual queries of eBay's system, BE's web crawlers exceeded the scope of any such consent when they began acting like robots by making repeated queries. See City of Amsterdam v. Daniel Goldreyer, Ltd., 882 F.Supp. 1273, 1281 (E.D.N.Y.1995) (“One who uses a chattel with the consent of another is subject to liability in trespass for any harm to the chattel which is caused by or occurs in the course of any use exceeding the consent, even though such use is not a conversion.”). Moreover, eBay repeatedly and explicitly notified BE that its use of eBay's computer system was unauthorized. The entire reason BE directed its queries through proxy servers was to evade eBay's attempts to stop this unauthorized access. The court concludes that BE's activity is sufficiently outside of the scope of the use permitted by eBay that it is unauthorized for the purposes of establishing a trespass. See Civic Western Corp. v. Zila Industries, Inc., 66 Cal.App.3d 1, 17, 135 Cal.Rptr. 915 (1977) (“It seems clear, however, that a trespass may occur if the party, entering pursuant to a limited consent, ... proceeds to exceed those limits ...”) (discussing trespass to real property).eBay argues that BE interfered with eBay's possessory interest in its computer system. Although eBay appears unlikely to be able to show a substantial interference at this time, such a showing is not required. Conduct that does not amount to a substantial interference with possession, but which consists of intermeddling with or use of another's personal property, is sufficient to establish a cause of action for trespass to chattel. See Thrifty-Tel, 46 Cal.App.4th at 1567, 54 Cal.Rptr.2d 468 (distinguishing the tort from conversion). Although the court admits some uncertainty as to the precise level of possessory interference required to constitute an intermeddling, there does not appear to be any dispute that eBay can show that BE's conduct amounts to use of eBay's computer systems. Accordingly, eBay has made a strong showing that it is likely to prevail on the merits of its assertion that BE's use of eBay's computer system was an unauthorized and intentional interference with eBay's possessory interest.

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b. Damage to eBay's Computer SystemA trespasser is liable when the trespass diminishes the condition, quality or value of personal property. See CompuServe, Inc. v. Cyber Promotions, 962 F.Supp. 1015 (S.D.Ohio 1997). The quality or value of personal property may be “diminished even though it is not physically damaged by defendant's conduct.” Id. at 1022. The Restatement offers the following explanation for the harm requirement:The interest of a possessor of a chattel in its inviolability, unlike the similar interest of a possessor of land, is not given legal protection by an action for nominal damages for harmless intermeddlings with the chattel. In order that an actor who interferes with another's chattel may be liable, his conduct must affect some other and more important interest of the possessor. Therefore, one who intentionally intermeddles with another's chattel is subject to liability only if his intermeddling is harmful to the possessor's materially valuable interest in the physical condition, quality, or value of the chattel, or if the possessor is deprived of the use of the chattel for a substantial time, or some other legally protected interest of the possessor is affected.... Sufficient legal protection of the possessor's interest in the mere inviolability of his chattel is afforded by his privilege to use reasonable force to protect his possession against even harmless interference.Restatement (Second) of Torts § 218 cmt. e (1977).eBay is likely to be able to demonstrate that BE's activities have diminished the quality or value of eBay's computer systems. BE's activities consume at least a portion of plaintiff's bandwidth and server capacity. . . . Although eBay does not claim that this consumption has led to any physical damage to eBay's computer system, nor does eBay provide any evidence to support the claim that it may have lost revenues or customers based on this use, eBay's claim is that BE's use is appropriating eBay's personal property by using valuable bandwidth and capacity, and necessarily compromising eBay's ability to use that capacity for its own purposes. See CompuServe, 962 F.Supp. at 1022 (“any value [plaintiff] realizes from its computer equipment is wholly derived from the extent to which that equipment can serve its subscriber base.”).BE argues that its searches represent a negligible load on plaintiff's computer systems, and do not rise to the level of impairment to the condition or value of eBay's computer system required to constitute a trespass. However, it is undisputed that eBay's server and its capacity are personal property, and that BE's searches use a portion of this property. Even if, as BE argues, its searches use only a small amount of eBay's computer system capacity, BE has nonetheless deprived eBay of the ability to use that portion of its personal property for its own purposes. The law recognizes no such right to use another's personal property. Accordingly, BE's actions appear to have caused injury to eBay and appear likely to continue to cause injury to eBay. If the court were to hold otherwise, it would likely encourage other auction aggregators to crawl the eBay site, potentially to the point of denying effective access to eBay's customers. If preliminary injunctive relief were denied, and other aggregators began to crawl the eBay site, there appears to be little doubt that the load on eBay's computer system would qualify as a substantial impairment of condition or value. California law does not require eBay to wait for such a disaster before applying to this court for relief. The court concludes that eBay has made a strong showing that it is likely to prevail on the merits of its trespass claim, and that there is at least a possibility that it will suffer irreparable harm if preliminary injunctive relief is not granted. eBay is therefore entitled to preliminary injunctive relief.

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. . . 3. Public InterestThe traditional equitable criteria for determining whether an injunction should issue include whether the public interest favors granting the injunction. American Motorcyclist Ass'n v. Watt, 714 F.2d 962, 965 (9th Cir.1983). The parties submit a variety of declarations asserting that the Internet will cease to function if, according to eBay, personal and intellectual property rights are not respected, or, according to BE, if information published on the Internet cannot be universally accessed and used. Although the court suspects that the Internet will not only survive, but continue to grow and develop regardless of the outcome of this litigation, the court also recognizes that it is poorly suited to determine what balance between encouraging the exchange of information, and preserving economic incentives to create, will maximize the public good. Particularly on the limited record available at the preliminary injunction stage, the court is unable to determine whether the general public interest factors in favor of or against a preliminary injunction.BE makes the more specific allegation that granting a preliminary injunction in favor of eBay will harm the public interest because eBay is alleged to have engaged in anticompetitive behavior in violation of federal antitrust law. The Ninth Circuit has noted that in evaluating whether to issue a preliminary injunction, the district court is under no obligation to consider the merits of any antitrust counterclaims once the plaintiff has demonstrated a likelihood of success on the merits. See Triad Sys. Corp. v. Southeastern Exp. Co., 64 F.3d 1330, 1336 n. 13 (9th Cir.1995) (discussing claim of copyright infringement). Although anticompetitive behavior may be appropriately considered in the context of a preliminary injunction based on trademark infringement, where misuse is an affirmative defense, see Helene Curtis Indus. v. Church & Dwight Co., 560 F.2d 1325 (7th Cir.1977), it does not appear to be appropriately considered here, because there is no equivalent affirmative defense to trespass to chattels. Accordingly, the court concludes the public interest does not weigh against granting a preliminary injunction.IV. ORDERBidder's Edge . . . [is] hereby enjoined pending the trial of this matter, from using any automated query program, robot, web crawler or other similar device, without written authorization, to access eBay's computer systems or networks, for the purpose of copying any part of eBay's auction database.

Notes and Questions1. It is sufficient for trespass to chattels occurs that an intentional unauthorized use of a chattel impair the chattel’s value. After finding that Bidders’ Edge’s searches were an intentional unauthorized use of eBay’s computers, the court addressed the question of whether there was sufficient damage to eBay’s computers to hold that the searches impaired their value. The court concluded that, even if Bidders’ Edge use only a small amount of eBay's computer capacity, it thereby deprived eBay of its ability to use that capacity, and hence that Bidders’ edge did impair the value of the computers. This creates an very broad right to exclude since any electronic access to a computer system will use some portion of the systems computing power, this means, in effect, that any intentional, unauthorized access to a computer will reduce its condition, quality or value. Should we recognize such a broad right?2. eBay’s grounds for issuing an injunction are different than its grounds for finding trespass to chattels (this point difference is often overlooked). eBay issues an

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injunction on the ground that others might be encouraged to systematically search eBay if Bidders’ Edge were allowed to. The combined searches might overload eBay’s computers and hence cause them to slow down or shut down. Why is the finding of trespass to chattels discussed in (1) not by itself a sufficient ground to issue an injunction?

Buchanan Marine Inc. v. Mccormack Sand Company

743 F.Supp. 139 (1990)

MEMORANDUM AND ORDER

NICKERSON, District Judge.

Plaintiff Buchanan Marine Inc. (Buchanan), an owner and operator of tugboats and barges in Connecticut and elsewhere, brought this action to enjoin defendants from using its commercial barge mooring in Stamford Harbor, Connecticut, and to recover damages allegedly arising from defendants' use of the mooring. . . . Defendants now move for summary judgment, arguing that Buchanan is not entitled to exclusive use of the buoy and that its claims for injunctive and declaratory relief should be dismissed. Defendants also ask for sanctions.

I

The facts . . . may be summarized as follows.

Buchanan owns and operates tug boats and barges for the delivery of stone and other bulk material in, among other places, Connecticut. Defendants operate barges in Stamford Harbor (the Harbor).

Both Buchanan and defendants have customers in the Harbor and say they require a harbor mooring to do business in the area. Apparently, placing a mooring outside the Harbor would cause a hazard to navigation and is thus not feasible.

Buchanan claims to own the physical buoy and to have obtained a permit in October 1981 from the Stamford Harbor master John Sheridan to maintain the buoy at a particular location in the Harbor. While allegedly never authorizing others to use the buoy, Buchanan admittedly tolerated until 1983 the occasional such use by defendants. . . .

In July 1982, Buchanan notified other companies towing barges in the Harbor that it would charge them for unauthorized tie-ups at the mooring. In response to Buchanan's notice, defendant McCormack Sand Company Inc. allegedly asked Sheridan for its own mooring permit and received a response that only one commercial anchorage would be permitted in the Harbor. . . .

Buchanan asserts that on November 5, 1985 certain of the defendants wrongly secured barges to the buoy. Because of their weight, the outermost three barges broke away and drifted to the Greenwich Town Beach. Buchanan's barge

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was damaged, and it incurred costs for cleaning up the beach.

Despite repeated oral and written warnings by Buchanan to remove their barges, defendants continue to use the mooring buoy.

II

A person commits a trespass to a chattel by "intentionally (a) dispossessing another of the chattel, or (b) using or intermeddling with a chattel in the possession of another." See Restatement (Second) of the Law of Torts § 217 (1965).

A person is liable to the possessor, the owner, of the chattel "if, but only if, (a) he dispossess the other of the chattel, or (b) the chattel is impaired as to its condition, quality, or value, or (c) the possessor is deprived of the use of the chattel for a substantial time, or (d) bodily harm is caused to the possessor, or harm is caused to some person or thing in which the possessor has a legally protected interest." Id. at § 218.

A person may recover "for all the harm to the chattel and for incidental damages proximately caused by the intermeddling." See Harper James & Gray, The Law of Torts (2d ed 1986) § 2.6 at 185.

There is no reason to doubt that Connecticut would follow the Restatement. Accord State v. Tully, 348 A.2d 603, 612 n. 3 (Conn.Sup.Ct.1974) (Bogdanski, Associate Justice, dissenting) (protecting another from harm justifies trespass to chattel).

Buchanan alleges it bought and maintained the eight by eight foot steel drum that, placed in the Harbor, has become the commercial mooring buoy at issue. Buchanan says it has not consented either expressly or by implication to defendants' use of the buoy and has not abandoned the buoy. . . .

[T]he court holds that the mooring buoy, whether sitting on land or floating in Stamford harbor, is Buchanan's chattel, and that defendants' meddling with it is either a trespass to a chattel or perhaps a conversion for which Buchanan may seek relief in the form of damages and an injunction.

Intel Corporation v. Hamidi

30 Cal.4th 1342 (2003) Werdegar, J.

Intel Corporation (Intel) maintains an electronic mail system, connected to the Internet, through which messages between employees and those outside the company can be sent and received, and permits its employees to make reasonable nonbusiness use of this system. On six occasions over almost two years, Kourosh Kenneth Hamidi, a former Intel employee, sent e-mails criticizing Intel's employment practices to numerous current employees on Intel's electronic mail system. Hamidi breached no computer security barriers in order to communicate with Intel employees. He offered to, and did, remove from his mailing list any

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recipient who so wished. Hamidi's communications to individual Intel employees caused neither physical damage nor functional disruption to the company's computers, nor did they at any time deprive Intel of the use of its computers. The contents of the messages, however, caused discussion among employees and managers.

On these facts, Intel brought suit, claiming that by communicating with its employees over the company's e-mail system Hamidi committed the tort of trespass to chattels. The trial court granted Intel's motion for summary judgment and enjoined Hamidi from any further mailings. A divided Court of Appeal affirmed.

After reviewing the decisions analyzing unauthorized electronic contact with computer systems as potential trespasses to chattels, we conclude that under California law the tort does not encompass, and should not be extended to encompass, an electronic communication that neither damages the recipient computer system nor impairs its functioning. Such an electronic communication does not constitute an actionable trespass to personal property, i.e., the computer system, because it does not interfere with the possessor's use or possession of, or any other legally protected interest in, the personal property itself. (See Zaslow v. Kroenert (1946) 29 Cal.2d 541, 551, 176 P.2d 1; Ticketmaster Corp. v. Tickets.com, Inc. (C.D.Cal., Aug. 10, 2000, No. 99CV7654) 2000 WL 1887522, p. *4; Rest.2d Torts, § 218.) The consequential economic damage Intel claims to have suffered, i.e., loss of productivity caused by employees reading and reacting to Hamidi's messages and company efforts to block the messages, is not an injury to the company's interest in its computers--which worked as intended and were unharmed by the communications--any more than the personal distress caused by reading an unpleasant letter would be an injury to the recipient's mailbox, or the loss of privacy caused by an intrusive telephone call would be an injury to the recipient's telephone equipment.

Our conclusion does not rest on any special immunity for communications by electronic mail; we do not hold that messages transmitted through the Internet are exempt from the ordinary rules of tort liability. To the contrary, e-mail, like other forms of communication, may in some circumstances cause legally cognizable injury to the recipient or to third parties and may be actionable under various common law or statutory theories. Indeed, on facts somewhat similar to those here, a company or its employees might be able to plead causes of action for interference with prospective economic relations (see Guillory v. Godfrey (1955) 134 Cal.App.2d 628, 630- 632, 286 P.2d 474 [defendant berated customers and prospective customers of plaintiffs' cafe with disparaging and racist comments] ), interference with contract (see Blender v. Superior Court (1942) 55 Cal.App.2d 24, 25-27, 130 P.2d 179 [defendant made false statements about plaintiff to his employer, resulting in plaintiff's discharge] ) or intentional infliction of emotional distress (see Kiseskey v. Carpenters' Trust for So. California (1983) 144 Cal.App.3d 222, 229-230, 192 Cal.Rptr. 492 [agents of defendant union threatened life, health, and family of employer if he did not sign agreement with union].) And, of course, as with any other means of publication, third party subjects of e-mail communications may under appropriate facts make claims for defamation, publication of private facts, or other speech-based torts. (See, e.g., Southridge Capital Management v. Lowry (S.D.N.Y.2002) 188 F.Supp.2d 388, 394-396 [allegedly false statements in e-mail

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sent to several of plaintiff's clients support actions for defamation and interference with contract].) Intel's claim fails not because e-mail transmitted through the Internet enjoys unique immunity, but because the trespass to chattels tort--unlike the causes of action just mentioned--may not, in California, be proved without evidence of an injury to the plaintiff's personal property or legal interest therein.

Nor does our holding affect the legal remedies of Internet service providers (ISP's) against senders of unsolicited commercial bulk e-mail (UCE), also known as "spam." (See Ferguson v. Friendfinders, Inc. (2002) 94 Cal.App.4th 1255, 1267, 115 Cal.Rptr.2d 258.) A series of federal district court decisions, beginning with CompuServe, Inc. v. Cyber Promotions, Inc. (S.D.Ohio 1997) 962 F.Supp. 1015, has approved the use of trespass to chattels as a theory of spammers' liability to ISP's, based upon evidence that the vast quantities of mail sent by spammers both overburdened the ISP's own computers and made the entire computer system harder to use for recipients, the ISP's customers. (See id. at pp. 1022-1023.) In those cases, discussed in greater detail below, the underlying complaint was that the extraordinary quantity of UCE impaired the computer system's functioning. In the present case, the claimed injury is located in the disruption or distraction caused to recipients by the contents of the e-mail messages, an injury entirely separate from, and not directly affecting, the possession or value of personal property.

FACTUAL AND PROCEDURAL BACKGROUND

We review a grant of summary judgment de novo; we must decide independently whether the facts not subject to triable dispute warrant judgment for the moving party as a matter of law. . . . The pertinent undisputed facts are as follows.

Hamidi, a former Intel engineer, together with others, formed an organization named Former and Current Employees of Intel (FACE-Intel) to disseminate information and views critical of Intel's employment and personnel policies and practices. FACE-Intel maintained a Web site (which identified Hamidi as Webmaster and as the organization's spokesperson) containing such material. In addition, over a 21-month period Hamidi, on behalf of FACE-Intel, sent six mass e-mails to employee addresses on Intel's electronic mail system. The messages criticized Intel's employment practices, warned employees of the dangers those practices posed to their careers, suggested employees consider moving to other companies, solicited employees' participation in FACE-Intel, and urged employees to inform themselves further by visiting FACE-Intel's Web site. The messages stated that recipients could, by notifying the sender of their wishes, be removed from FACE-Intel's mailing list; Hamidi did not subsequently send messages to anyone who requested removal.

Each message was sent to thousands of addresses (as many as 35,000 according to FACE-Intel's Web site), though some messages were blocked by Intel before reaching employees. Intel's attempt to block internal transmission of the messages succeeded only in part; Hamidi later admitted he evaded blocking efforts by using different sending computers. When Intel, in March 1998, demanded in writing that Hamidi and FACE-Intel stop sending e-mails to Intel's computer system,

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Hamidi asserted the organization had a right to communicate with willing Intel employees; he sent a new mass mailing in September 1998.

The summary judgment record contains no evidence Hamidi breached Intel's computer security in order to obtain the recipient addresses for his messages; indeed, internal Intel memoranda show the company's management concluded no security breach had occurred.2 Hamidi stated he created the recipient address list using an Intel directory on a floppy disk anonymously sent to him. Nor is there any evidence that the receipt or internal distribution of Hamidi's electronic messages damaged Intel's computer system or slowed or impaired its functioning. Intel did present uncontradicted evidence, however, that many employee recipients asked a company official to stop the messages and that staff time was consumed in attempts to block further messages from FACE- Intel. According to the FACE-Intel Web site, moreover, the messages had prompted discussions between "[e]xcited and nervous managers" and the company's human resources department.

Intel sued Hamidi and FACE-Intel, pleading causes of action for trespass to chattels and nuisance, and seeking both actual damages and an injunction against further e-mail messages. Intel later voluntarily dismissed its nuisance claim and waived its demand for damages. The trial court entered default against FACE-Intel upon that organization's failure to answer. The court then granted Intel's motion for summary judgment, permanently enjoining Hamidi, FACE-Intel, and their agents "from sending unsolicited e-mail to addresses on Intel's computer systems." Hamidi appealed; FACE-Intel did not.

The Court of Appeal, with one justice dissenting, affirmed the grant of injunctive relief. The majority took the view that the use of or intermeddling with another's personal property is actionable as a trespass to chattels without proof of any actual injury to the personal property; even if Intel could not show any damages resulting from Hamidi's sending of messages, "it showed he was disrupting its business by using its property and therefore is entitled to injunctive relief based on a theory of trespass to chattels." The dissenting justice warned that the majority's application of the trespass to chattels tort to "unsolicited electronic mail that causes no harm to the private computer system that receives it" would "expand the tort of trespass to chattel in untold ways and to unanticipated circumstances."

We granted Hamidi's petition for review.

DISCUSSION I. Current California Tort Law2 To the extent, therefore, that Justice Mosk suggests Hamidi breached the security of Intel's internal computer network by "circumvent [ing]" Intel's "security measures" and entering the company's "intranet" (dis. opn. of Mosk, J., post, 1 Cal.Rptr.3d at p. 67, 71 P.3d at p. 326), the evidence does not support such an implication. An "intranet" is "a network based on TCP/IP protocols (an internet) belonging to an organization, usually a corporation, accessible only by the organization's members, employees, or others with authorization." (<http:// www.webopedia.com/TERM/i/intranet.html [as of June 30, 2003].) Hamidi used only a part of Intel's computer network accessible to outsiders.

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Dubbed by Prosser the "little brother of conversion," the tort of trespass to chattels allows recovery for interferences with possession of personal property "not sufficiently important to be classed as conversion, and so to compel the defendant to pay the full value of the thing with which he has interfered." (Prosser & Keeton, Torts (5th ed.1984) § 14, pp. 85-86.)

Though not amounting to conversion, the defendant's interference must, to be actionable, have caused some injury to the chattel or to the plaintiff's rights in it. Under California law, trespass to chattels "lies where an intentional interference with the possession of personal property has proximately caused injury." ( Thrifty- Tel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559, 1566, 54 Cal.Rptr.2d 468, italics added.) In cases of interference with possession of personal property not amounting to conversion, "the owner has a cause of action for trespass or case, and may recover only the actual damages suffered by reason of the impairment of the property or the loss of its use." ( Zaslow v. Kroenert, supra, 29 Cal.2d at p. 551, 176 P.2d 1, italics added; accord, Jordan v. Talbot (1961) 55 Cal.2d 597, 610, 12 Cal.Rptr. 488, 361 P.2d 20.) In modern American law generally, "[t]respass remains as an occasional remedy for minor interferences, resulting in some damage, but not sufficiently serious or sufficiently important to amount to the greater tort" of conversion. (Prosser & Keeton, Torts, supra, § 15, p. 90, italics added.)

The Restatement, too, makes clear that some actual injury must have occurred in order for a trespass to chattels to be actionable. Under section 218 of the Restatement Second of Torts, dispossession alone, without further damages, is actionable (see id., par. (a) & com. d, pp. 420- 421), but other forms of interference require some additional harm to the personal property or the possessor's interests in it. (Id., pars. (b)-(d).) "The interest of a possessor of a chattel in its inviolability, unlike the similar interest of a possessor of land, is not given legal protection by an action for nominal damages for harmless intermeddlings with the chattel. In order that an actor who interferes with another's chattel may be liable, his conduct must affect some other and more important interest of the possessor. Therefore, one who intentionally intermeddles with another's chattel is subject to liability only if his intermeddling is harmful to the possessor's materially valuable interest in the physical condition, quality, or value of the chattel, or if the possessor is deprived of the use of the chattel for a substantial time, or some other legally protected interest of the possessor is affected as stated in Clause (c). Sufficient legal protection of the possessor's interest in the mere inviolability of his chattel is afforded by his privilege to use reasonable force to protect his possession against even harmless interference." (Id., com. e, pp. 421-422, italics added.)

The Court of Appeal (quoting 7 Speiser et al., American Law of Torts (1990) Trespass, § 23:23, p. 667) referred to " 'a number of very early cases [showing that] any unlawful interference, however slight, with the enjoyment by another of his personal property, is a trespass.' " But while a harmless use or touching of personal property may be a technical trespass (see Rest.2d Torts, § 217), an interference (not amounting to dispossession) is not actionable, under modern California and broader American law, without a showing of harm. As already discussed, this is the rule embodied in the Restatement (Rest.2d Torts, § 218) and adopted by California law ( Zaslow v. Kroenert, supra, 29 Cal.2d at p. 551, 176 P.2d

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1; Thrifty-Tel, Inc. v. Bezenek, supra, 46 Cal.App.4th at p. 1566, 54 Cal.Rptr.2d 468).

In this respect, as Prosser explains, modern day trespass to chattels differs both from the original English writ and from the action for trespass to land: "Another departure from the original rule of the old writ of trespass concerns the necessity of some actual damage to the chattel before the action can be maintained. Where the defendant merely interferes without doing any harm--as where, for example, he merely lays hands upon the plaintiff's horse, or sits in his car--there has been a division of opinion among the writers, and a surprising dearth of authority. By analogy to trespass to land there might be a technical tort in such a case .... Such scanty authority as there is, however, has considered that the dignitary interest in the inviolability of chattels, unlike that as to land, is not sufficiently important to require any greater defense than the privilege of using reasonable force when necessary to protect them. Accordingly it has been held that nominal damages will not be awarded, and that in the absence of any actual damage the action will not lie." (Prosser & Keeton, Torts, supra, § 14, p. 87, italics added, fns. omitted.)

Intel suggests that the requirement of actual harm does not apply here because it sought only injunctive relief, as protection from future injuries. But as Justice Kolkey, dissenting below, observed, "[t]he fact the relief sought is injunctive does not excuse a showing of injury, whether actual or threatened." Indeed, in order to obtain injunctive relief the plaintiff must ordinarily show that the defendant's wrongful acts threaten to cause irreparable injuries, ones that cannot be adequately compensated in damages. (5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 782, p. 239.) Even in an action for trespass to real property, in which damage to the property is not an element of the cause of action, "the extraordinary remedy of injunction" cannot be invoked without showing the likelihood of irreparable harm. ( Mechanics' Foundry v. Ryall (1888) 75 Cal. 601, 603, 17 P. 703; see Mendelson v. McCabe (1904) 144 Cal. 230, 232-233, 77 P. 915 [injunction against trespass to land proper where continued trespasses threaten creation of prescriptive right and repetitive suits for damages would be inadequate remedy].) A fortiori, to issue an injunction without a showing of likely irreparable injury in an action for trespass to chattels, in which injury to the personal property or the possessor's interest in it is an element of the action, would make little legal sense.

The dispositive issue in this case, therefore, is whether the undisputed facts demonstrate Hamidi's actions caused or threatened to cause damage to Intel's computer system, or injury to its rights in that personal property, such as to entitle Intel to judgment as a matter of law. To review, the undisputed evidence revealed no actual or threatened damage to Intel's computer hardware or software and no interference with its ordinary and intended operation. Intel was not dispossessed of its computers, nor did Hamidi's messages prevent Intel from using its computers for any measurable length of time. Intel presented no evidence its system was slowed or otherwise impaired by the burden of delivering Hamidi's electronic messages. Nor was there any evidence transmission of the messages imposed any marginal cost on the operation of Intel's computers. In sum, no evidence suggested that in sending messages through Intel's Internet connections and internal computer system Hamidi used the system in any manner in which it was not intended to function or impaired the system in any way. Nor does the evidence show the

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request of any employee to be removed from FACE-Intel's mailing list was not honored. The evidence did show, however, that some employees who found the messages unwelcome asked management to stop them and that Intel technical staff spent time and effort attempting to block the messages. A statement on the FACE-Intel Web site, moreover, could be taken as an admission that the messages had caused "[e]xcited and nervous managers" to discuss the matter with Intel's human resources department.

Relying on a line of decisions, most from federal district courts, applying the tort of trespass to chattels to various types of unwanted electronic contact between computers, Intel contends that, while its computers were not damaged by receiving Hamidi's messages, its interest in the "physical condition, quality or value" (Rest.2d Torts, § 218, com. e, p. 422) of the computers was harmed. We disagree. The cited line of decisions does not persuade us that the mere sending of electronic communications that assertedly cause injury only because of their contents constitutes an actionable trespass to a computer system through which the messages are transmitted. Rather, the decisions finding electronic contact to be a trespass to computer systems have generally involved some actual or threatened interference with the computers' functioning.

In Thrifty-Tel, Inc. v. Bezenek, supra, 46 Cal.App.4th at pages 1566-1567, 54 Cal.Rptr.2d 468 ( Thrifty-Tel ), the California Court of Appeal held that evidence of automated searching of a telephone carrier's system for authorization codes supported a cause of action for trespass to chattels. The defendant's automated dialing program "overburdened the [plaintiff's] system, denying some subscribers access to phone lines" ( Thrifty-Tel, supra, 46 Cal.App. 4th at p. 1564, 54 Cal.Rptr.2d 468), showing the requisite injury.

Following Thrifty-Tel, a series of federal district court decisions held that sending UCE through an ISP's equipment may constitute trespass to the ISP's computer system. The lead case, CompuServe, Inc. v. Cyber Promotions, Inc., supra, 962 F.Supp. 1015, 1021-1023 ( CompuServe ), was followed by Hotmail Corp. v. Van$ Money Pie, Inc. (N.D.Cal., Apr. 16, 1998, No. C 98-20064 JW) 1998 WL 388389, page *7, America Online, Inc. v. IMS (E.D.Va.1998) 24 F.Supp.2d 548, 550- 551, and America Online, Inc. v. LCGM, Inc. (E.D.Va.1998) 46 F.Supp.2d 444, 451- 452.

In each of these spamming cases, the plaintiff showed, or was prepared to show, some interference with the efficient functioning of its computer system. In CompuServe, the plaintiff ISP's mail equipment monitor stated that mass UCE mailings, especially from nonexistent addresses such as those used by the defendant, placed "a tremendous burden" on the ISP's equipment, using "disk space and drain[ing] the processing power," making those resources unavailable to serve subscribers. ( CompuServe, supra, 962 F.Supp. at p. 1022.) Similarly, in Hotmail Corp. v. Van$ Money Pie, Inc., supra, 1998 WL 388389 at page *7, the court found the evidence supported a finding that the defendant's mailings "fill[ed] up Hotmail's computer storage space and threaten [ed] to damage Hotmail's ability to service its legitimate customers." America Online, Inc. v. IMS, decided on summary judgment, was deemed factually indistinguishable from CompuServe; the court observed that in both cases the plaintiffs "alleged that processing the bulk e-mail cost them time

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and money and burdened their equipment." ( America Online, Inc. v. IMS, supra, 24 F.Supp.2d at p. 550.) The same court, in America Online, Inc. v. LCGM, Inc., supra, 46 F.Supp.2d at page 452, simply followed CompuServe and its earlier America Online decision, quoting the former's explanation that UCE burdened the computer's processing power and memory.

Building on the spamming cases, in particular CompuServe, three even more recent district court decisions addressed whether unauthorized robotic data collection [FN4] from a company's publicly accessible Web site is a trespass on the company's computer system. ( eBay, Inc. v. Bidder's Edge, Inc., supra, 100 F.Supp.2d at pp. 1069-1072 ( eBay ); Register.com, Inc. v. Verio, Inc. (S.D.N.Y.2000) 126 F.Supp.2d 238, 248-251; Ticketmaster Corp. v. Tickets.com, Inc., supra, 2000 WL 1887522, at p. *4.) The two district courts that found such automated data collection to constitute a trespass relied, in part, on the deleterious impact this activity could have, especially if replicated by other searchers, on the functioning of a Web site's computer equipment.

FN4. Data search and collection robots, also known as "Web bots" or "spiders," are programs designed to rapidly search numerous Web pages or sites, collecting, retrieving, and indexing information from these pages. Their uses include creation of searchable databases, Web catalogues and comparison shopping services. ( eBay, Inc. v. Bidder's Edge, Inc. (N.D.Cal.2000) 100 F.Supp.2d 1058, 1060-1061; O'Rourke, Property Rights and Competition on the Internet: In Search of an Appropriate Analogy (2001) 16 Berkeley Tech. L.J. 561, 570-571; Quilter, The Continuing Expansion of Cyberspace Trespass to Chattels (2002) 17 Berkeley Tech. L.J. 421, 423-424.)

In the leading case, eBay, the defendant Bidder's Edge (BE), operating an auction aggregation site, accessed the eBay Web site about 100,000 times per day, accounting for between 1 and 2 percent of the information requests received by eBay and a slightly smaller percentage of the data transferred by eBay. ( eBay, supra, 100 F.Supp.2d at pp. 1061, 1063.) The district court rejected eBay's claim that it was entitled to injunctive relief because of the defendant's unauthorized presence alone, or because of the incremental cost the defendant had imposed on operation of the eBay site ( id. at pp. 1065-1066), but found sufficient proof of threatened harm in the potential for others to imitate the defendant's activity: "If BE's activity is allowed to continue unchecked, it would encourage other auction aggregators to engage in similar recursive searching of the eBay system such that eBay would suffer irreparable harm from reduced system performance, system unavailability, or data losses." ( Id. at p. 1066.) Again, in addressing the likelihood of eBay's success on its trespass to chattels cause of action, the court held the evidence of injury to eBay's computer system sufficient to support a preliminary injunction: "If the court were to hold otherwise, it would likely encourage other auction aggregators to crawl the eBay site, potentially to the point of denying effective access to eBay's customers. If preliminary injunctive relief were denied, and other aggregators began to crawl the eBay site, there appears to be little doubt that the load on eBay's computer system would qualify as a substantial impairment of condition or value." ( Id. at pp. 1071-1072.)

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Another district court followed eBay on similar facts--a domain name registrar's claim against a Web hosting and development site that robotically searched the registrar's database of newly registered domain names in search of business leads--in Register.com, Inc. v. Verio, Inc., supra, 126 F.Supp.2d at pages 249-251. Although the plaintiff was unable to measure the burden the defendant's searching had placed on its system ( id. at pp. 249-250), the district court, quoting the declaration of one of the plaintiff's officers, found sufficient evidence of threatened harm to the system in the possibility the defendant's activities would be copied by others: " 'I believe that if Verio's searching of Register.com's WHOIS database were determined to be lawful, then every purveyor of Internet-based services would engage in similar conduct.' " ( Id. at p. 250.) Like eBay, the court observed, Register.com had a legitimate fear "that its servers will be flooded by search robots." ( Id. at p. 251.)

In the third decision discussing robotic data collection as a trespass, Ticketmaster Corp. v. Tickets.com, Inc., supra, 2000 WL 1887522 ( Ticketmaster ), the court, distinguishing eBay, found insufficient evidence of harm to the chattel to constitute an actionable trespass: "A basic element of trespass to chattels must be physical harm to the chattel (not present here) or some obstruction of its basic function (in the court's opinion not sufficiently shown here).... The comparative use [by the defendant of the plaintiff's computer system] appears very small and there is no showing that the use interferes to any extent with the regular business of [the plaintiff].... Nor here is the specter of dozens or more parasites joining the fray, the cumulative total of which could affect the operation of [the plaintiff's ] business." ( id. at p. *4, italics added.)

In the decisions so far reviewed, the defendant's use of the plaintiff's computer system was held sufficient to support an action for trespass when it actually did, or threatened to, interfere with the intended functioning of the system, as by significantly reducing its available memory and processing power. In Ticketmaster, supra, 2000 WL 1887522, the one case where no such effect, actual or threatened, had been demonstrated, the court found insufficient evidence of harm to support a trespass action. These decisions do not persuade us to Intel's position here, for Intel has demonstrated neither any appreciable effect on the operation of its computer system from Hamidi's messages, nor any likelihood that Hamidi's actions will be replicated by others if found not to constitute a trespass.

That Intel does not claim the type of functional impact that spammers and robots have been alleged to cause is not surprising in light of the differences between Hamidi's activities and those of a commercial enterprise that uses sheer quantity of messages as its communications strategy. Though Hamidi sent thousands of copies of the same message on six occasions over 21 months, that number is minuscule compared to the amounts of mail sent by commercial operations. The individual advertisers sued in America Online, Inc. v. IMS, supra, 24 F.Supp.2d at page 549, and America Online, Inc. v. LCGM, Inc., supra, 46 F.Supp.2d at page 448, were alleged to have sent more than 60 million messages over 10 months and more than 92 million messages over seven months, respectively. Collectively, UCE has reportedly come to constitute about 45 percent of all e-mail. (Hansell, Internet Is Losing Ground in Battle Against Spam, N.Y. Times (Apr. 22,

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2003) p. A1, col. 3.) The functional burden on Intel's computers, or the cost in time to individual recipients, of receiving Hamidi's occasional advocacy messages cannot be compared to the burdens and costs caused ISP's and their customers by the ever-rising deluge of commercial e-mail.

Intel relies on language in the eBay decision suggesting that unauthorized use of another's chattel is actionable even without any showing of injury: "Even if, as [defendant] BE argues, its searches use only a small amount of eBay's computer system capacity, BE has nonetheless deprived eBay of the ability to use that portion of its personal property for its own purposes. The law recognizes no such right to use another's personal property." ( eBay, supra, 100 F.Supp.2d at p. 1071.) But as the eBay court went on immediately to find that the defendant's conduct, if widely replicated, would likely impair the functioning of the plaintiff's system ( id. at pp. 1071-1072), we do not read the quoted remarks as expressing the court's complete view of the issue. In isolation, moreover, they would not be a correct statement of California or general American law on this point. While one may have no right temporarily to use another's personal property, such use is actionable as a trespass only if it "has proximately caused injury." ( Thrifty-Tel, supra, 46 Cal.App.4th at p. 1566, 54 Cal.Rptr.2d 468.) "[I]n the absence of any actual damage the action will not lie." (Prosser & Keeton, Torts, supra, § 14, p. 87.) Short of dispossession, personal injury, or physical damage (not present here), intermeddling is actionable only if "the chattel is impaired as to its condition, quality, or value, or [¶ ] ... the possessor is deprived of the use of the chattel for a substantial time." (Rest.2d Torts, § 218, pars. (b), (c).) In particular, an actionable deprivation of use "must be for a time so substantial that it is possible to estimate the loss caused thereby. A mere momentary or theoretical deprivation of use is not sufficient unless there is a dispossession...." (Id., com. i, p. 423.) That Hamidi's messages temporarily used some portion of the Intel computers' processors or storage is, therefore, not enough; Intel must, but does not, demonstrate some measurable loss from the use of its computer system. [FN5]

FN5. In the most recent decision relied upon by Intel, Oyster Software, Inc. v. Forms Processing, Inc. (N.D.Cal., Dec. 6, 2001, No. C-00- 0724 JCS) 2001 WL 1736382, pages *12-*13, a federal magistrate judge incorrectly read eBay as establishing, under California law, that mere unauthorized use of another's computer system constitutes an actionable trespass. The plaintiff accused the defendant, a business competitor, of copying the metatags (code describing the contents of a Web site to a search engine) from the plaintiff's Web site, resulting in diversion of potential customers for the plaintiff's services. ( Id. at pp. *1-*2.) With regard to the plaintiff's trespass claim (the plaintiff also pleaded causes of action for, inter alia, misappropriation, copyright and trademark infringement), the magistrate judge concluded that eBay imposed no requirement of actual damage and that the defendant's conduct was sufficient to establish a trespass "simply because [it] amounted to 'use' of Plaintiff's computer." ( Id. at p. *13.) But as just explained, we do not read eBay, supra, 100 F.Supp.2d 1058, as holding that the actual injury requirement may be dispensed with, and such a suggestion would, in any event, be erroneous as a statement of California law.

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In addition to impairment of system functionality, CompuServe and its progeny also refer to the ISP's loss of business reputation and customer goodwill, resulting from the inconvenience and cost that spam causes to its members, as harm to the ISP's legally protected interests in its personal property. (See CompuServe, supra, 962 F.Supp. at p. 1023; Hotmail Corp. v. Van$ Money Pie, Inc., supra, 1998 WL 388389 at p. *7; America Online, Inc. v. IMS, supra, 24 F.Supp.2d at p. 550.) Intel argues that its own interest in employee productivity, assertedly disrupted by Hamidi's messages, is a comparable protected interest in its computer system. We disagree.

Whether the economic injuries identified in CompuServe were properly considered injuries to the ISP's possessory interest in its personal property, the type of property interest the tort is primarily intended to protect (see Rest.2d Torts, § 218 & com. e, pp. 421-422; Prosser & Keeton, Torts, supra, § 14, p. 87), has been questioned. [FN6] "[T]he court broke the chain between the trespass and the harm, allowing indirect harms to CompuServe's business interests--reputation, customer goodwill, and employee time--to count as harms to the chattel (the server)." (Quilter, The Continuing Expansion of Cyberspace Trespass to Chattels, supra, 17 Berkeley Tech. L.J. at pp. 429-430.) "[T]his move cuts trespass to chattels free from its moorings of dispossession or the equivalent, allowing the court free reign [sic] to hunt for 'impairment.' " (Burk, The Trouble with Trespass (2000) 4 J. Small & Emerging Bus.L. 27, 35.) But even if the loss of goodwill identified in CompuServe were the type of injury that would give rise to a trespass to chattels claim under California law, Intel's position would not follow, for Intel's claimed injury has even less connection to its personal property than did CompuServe's.

FN6. In support of its reasoning, the CompuServe court cited paragraph (d) of section 218 of the Restatement Second of Torts, which refers to harm "to some person or thing in which the possessor has a legally protected interest." As the comment to this paragraph explains, however, it is intended to cover personal injury to the possessor or another person in whom the possessor has a legal interest, or injury to "other chattel or land" in which the possessor of the chattel subject to the trespass has a legal interest. (Rest.2d Torts, § 218, com. j, p. 423.) No personal injury was claimed either in CompuServe or in the case at bar, and neither the lost goodwill in CompuServe nor the loss of employee efficiency claimed in the present case is chattel or land.

CompuServe's customers were annoyed because the system was inundated with unsolicited commercial messages, making its use for personal communication more difficult and costly. ( CompuServe, supra, 962 F.Supp. at p. 1023.) Their complaint, which allegedly led some to cancel their CompuServe service, was about the functioning of CompuServe's electronic mail service. Intel's workers, in contrast, were allegedly distracted from their work not because of the frequency or quantity of Hamidi's messages, but because of assertions and opinions the messages conveyed. Intel's complaint is thus about the contents of the messages rather than the functioning of the company's e-mail system. Even accepting CompuServe' s economic injury rationale, therefore, Intel's position represents a further extension of the trespass to chattels tort, fictionally recharacterizing the allegedly injurious

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effect of a communication's contents on recipients as an impairment to the device which transmitted the message.

This theory of "impairment by content" (Burk, The Trouble with Trespass, supra, 4 J. Small & Emerging Bus.L. at p. 37) threatens to stretch trespass law to cover injuries far afield from the harms to possession the tort evolved to protect. Intel's theory would expand the tort of trespass to chattels to cover virtually any unconsented--to communication that, solely because of its content, is unwelcome to the recipient or intermediate transmitter. As the dissenting justice below explained, " 'Damage' of this nature--the distraction of reading or listening to an unsolicited communication--is not within the scope of the injury against which the trespass-to-chattel tort protects, and indeed trivializes it. After all, ' [t]he property interest protected by the old action of trespass was that of possession; and this has continued to affect the character of the action.' (Prosser & Keeton on Torts, supra, § 14, p. 87.) Reading an e-mail transmitted to equipment designed to receive it, in and of itself, does not affect the possessory interest in the equipment. [¶ ] Indeed, if a chattel's receipt of an electronic communication constitutes a trespass to that chattel, then not only are unsolicited telephone calls and faxes trespasses to chattel, but unwelcome radio waves and television signals also constitute a trespass to chattel every time the viewer inadvertently sees or hears the unwanted program." We agree. While unwelcome communications, electronic or otherwise, can cause a variety of injuries to economic relations, reputation and emotions, those interests are protected by other branches of tort law; in order to address them, we need not create a fiction of injury to the communication system.

Nor may Intel appropriately assert a property interest in its employees' time. "The Restatement test clearly speaks in the first instance to the impairment of the chattel.... But employees are not chattels (at least not in the legal sense of the term)." (Burk, The Trouble with Trespass, supra, 4 J. Small & Emerging Bus.L. at p. 36.) Whatever interest Intel may have in preventing its employees from receiving disruptive communications, it is not an interest in personal property, and trespass to chattels is therefore not an action that will lie to protect it. Nor, finally, can the fact Intel staff spent time attempting to block Hamidi's messages be bootstrapped into an injury to Intel's possessory interest in its computers. To quote, again, from the dissenting opinion in the Court of Appeal: "[I]t is circular to premise the damage element of a tort solely upon the steps taken to prevent the damage. Injury can only be established by the completed tort's consequences, not by the cost of the steps taken to avoid the injury and prevent the tort; otherwise, we can create injury for every supposed tort."

Intel connected its e-mail system to the Internet and permitted its employees to make use of this connection both for business and, to a reasonable extent, for their own purposes. In doing so, the company necessarily contemplated the employees' receipt of unsolicited as well as solicited communications from other companies and individuals. That some communications would, because of their contents, be unwelcome to Intel management was virtually inevitable. Hamidi did nothing but use the e-mail system for its intended purpose--to communicate with employees. The system worked as designed, delivering the messages without any physical or functional harm or disruption. These occasional transmissions cannot reasonably be viewed as impairing the quality or value of Intel's computer system.

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We conclude, therefore, that Intel has not presented undisputed facts demonstrating an injury to its personal property, or to its legal interest in that property, that support, under California tort law, an action for trespass to chattels.

II. Proposed Extension of California Tort Law

We next consider whether California common law should be extended to cover, as a trespass to chattels, an otherwise harmless electronic communication whose contents are objectionable. We decline to so expand California law. Intel, of course, was not the recipient of Hamidi's messages, but rather the owner and possessor of computer servers used to relay the messages, and it bases this tort action on that ownership and possession. The property rule proposed is a rigid one, under which the sender of an electronic message would be strictly liable to the owner of equipment through which the communication passes--here, Intel--for any consequential injury flowing from the contents of the communication. The arguments of amici curiae and academic writers on this topic, discussed below, leave us highly doubtful whether creation of such a rigid property rule would be wise.

Writing on behalf of several industry groups appearing as amici curiae, Professor Richard A. Epstein of the University of Chicago urges us to excuse the required showing of injury to personal property in cases of unauthorized electronic contact between computers, "extending the rules of trespass to real property to all interactive Web sites and servers." The court is thus urged to recognize, for owners of a particular species of personal property, computer servers, the same interest in inviolability as is generally accorded a possessor of land. In effect, Professor Epstein suggests that a company's server should be its castle, upon which any unauthorized intrusion, however harmless, is a trespass.

Epstein's argument derives, in part, from the familiar metaphor of the Internet as a physical space, reflected in much of the language that has been used to describe it: "cyberspace," "the information superhighway," e-mail "addresses," and the like. Of course, the Internet is also frequently called simply the "Net," a term, Hamidi points out, "evoking a fisherman's chattel." A major component of the Internet is the World Wide "Web," a descriptive term suggesting neither personal nor real property, and " cyberspace" itself has come to be known by the oxymoronic phrase "virtual reality," which would suggest that any real property "located" in "cyberspace" must be "virtually real" property. Metaphor is a two-edged sword.

Indeed, the metaphorical application of real property rules would not, by itself, transform a physically harmless electronic intrusion on a computer server into a trespass. That is because, under California law, intangible intrusions on land, including electromagnetic transmissions, are not actionable as trespasses (though they may be as nuisances) unless they cause physical damage to the real property. ( San Diego Gas & Electric Co. v. Superior Court (1996) 13 Cal.4th 893, 936-937, 55 Cal.Rptr.2d 724, 920 P.2d 669.) Since Intel does not claim Hamidi's electronically transmitted messages physically damaged its servers, it could not prove a trespass to land even were we to treat the computers as a type of real property. Some further extension of the conceit would be required, under which the electronic signals Hamidi sent would be recast as tangible intruders, perhaps as tiny

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messengers rushing through the "hallways" of Intel's computers and bursting out of employees' computers to read them Hamidi's missives. But such fictions promise more confusion than clarity in the law. (See eBay, supra, 100 F.Supp.2d at pp. 1065-1066 [rejecting eBay's argument that the defendant's automated data searches "should be thought of as equivalent to sending in an army of 100,000 robots a day to check the prices in a competitor's store"].)

The plain fact is that computers, even those making up the Internet, are--like such older communications equipment as telephones and fax machines--personal property, not realty. Professor Epstein observes that "[a]lthough servers may be moved in real space, they cannot be moved in cyberspace," because an Internet server must, to be useful, be accessible at a known address. But the same is true of the telephone: to be useful for incoming communication, the telephone must remain constantly linked to the same number (or, when the number is changed, the system must include some forwarding or notification capability, a qualification that also applies to computer addresses). Does this suggest that an unwelcome message delivered through a telephone or fax machine should be viewed as a trespass to a type of real property? We think not: As already discussed, the contents of a telephone communication may cause a variety of injuries and may be the basis for a variety of tort actions (e.g., defamation, intentional infliction of emotional distress, invasion of privacy), but the injuries are not to an interest in property, much less real property, and the appropriate tort is not trespass. [FN7]

FN7. The tort law discussion in Justice Brown's dissenting opinion similarly suffers from an overreliance on metaphor and analogy. Attempting to find an actionable trespass, Justice Brown analyzes Intel's e-mail system as comparable to the exterior of an automobile (dis. opn. of Brown, J., post, 1 Cal.Rptr.3d at pp. 52-53, 71 P.3d at pp. 313-314), a plot of land (id., at pp. 60-61, 71 P.3d at pp. 319-320), the interior of an automobile (p. 62, 71 P.3d p. 321), a toothbrush (pp. 64-65, 71 P.3d p. 323), a head of livestock (p. 65, 71 P.3d p. 323), and a mooring buoy (pp. 65-66, 71 P.3d pp. 324-325), while Hamidi is characterized as a vandal damaging a school building (pp. 63-64, 71 P.3d p. 322) or a prankster unplugging and moving employees' computers (p. 65, 71 P.3d p. 324). These colorful analogies tend to obscure the plain fact that this case involves communications equipment, used by defendant to communicate. Intel's e-mail system was equipment designed for speedy communication between employees and the outside world; Hamidi communicated with Intel employees over that system in a manner entirely consistent with its design; and Intel objected not because of an offense against the integrity or dignity of its computers, but because the communications themselves affected employee-recipients in a manner Intel found undesirable. The proposal that we extend trespass to chattels to cover any communication that the owner of the communications equipment considers annoying or distracting raises, moreover, concerns about control over the flow of information and views that would not be presented by, for example, an injunction against chasing another's cattle or sleeping in her car.

More substantively, Professor Epstein argues that a rule of computer server

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inviolability will, through the formation or extension of a market in computer-to-computer access, create "the right social result." In most circumstances, he predicts, companies with computers on the Internet will continue to authorize transmission of information through e-mail, Web site searching, and page linking because they benefit by that open access. When a Web site owner does deny access to a particular sending, searching, or linking computer, a system of "simple one-on-one negotiations" will arise to provide the necessary individual licenses.

Other scholars are less optimistic about such a complete propertization of the Internet. Professor Mark Lemley of the University of California, Berkeley, writing on behalf of an amici curiae group of professors of intellectual property and computer law, observes that under a property rule of server inviolability, "each of the hundreds of millions of [Internet] users must get permission in advance from anyone with whom they want to communicate and anyone who owns a server through which their message may travel." The consequence for e-mail could be a substantial reduction in the freedom of electronic communication, as the owner of each computer through which an electronic message passes could impose its own limitations on message content or source. As Professor Dan Hunter of the University of Pennsylvania asks rhetorically: "Does this mean that one must read the 'Terms of Acceptable Email Usage' of every email system that one emails in the course of an ordinary day? If the University of Pennsylvania had a policy that sending a joke by email would be an unauthorized use of their system, then under the logic of [the lower court decision in this case], you commit 'trespass' if you emailed me a ... cartoon." (Hunter, Cyberspace as Place, and the Tragedy of the Digital Anticommons (2003) 91 Cal. L.Rev. 439, 508-509.)

Web site linking, Professor Lemley further observes, "would exist at the sufferance of the linked-to party, because a Web user who followed a 'disapproved' link would be trespassing on the plaintiff's server, just as sending an e-mail is trespass under the [lower] court's theory." Another writer warns that "[c]yber-trespass theory will curtail the free flow of price and product information on the Internet by allowing website owners to tightly control who and what may enter and make use of the information housed on its Internet site." (Chang, Bidding on Trespass: eBay, Inc. v. Bidder's Edge, Inc. and the Abuse of Trespass Theory in Cyberspace Law (2001) 29 AIPLA Q.J. 445, 459.) A leading scholar of Internet law and policy, Professor Lawrence Lessig of Stanford University, has criticized Professor Epstein's theory of the computer server as quasi-real property, previously put forward in the eBay case ( eBay, supra, 100 F.Supp.2d 1058), on the ground that it ignores the costs to society in the loss of network benefits: "eBay benefits greatly from a network that is open and where access is free. It is this general feature of the Net that makes the Net so valuable to users and a source of great innovation. And to the extent that individual sites begin to impose their own rules of exclusion, the value of the network as a network declines. If machines must negotiate before entering any individual site, then the costs of using the network climb." (Lessig, The Future of Ideas: The Fate of the Commons in a Connected World (2001) p. 171; see also Hunter, Cyberspace as Place, and the Tragedy of the Digital Anticommons, supra, 91 Cal. L.Rev. at p. 512 ["If we continue to mark out anticommons claims in cyberspace, not only will we preclude better, more innovative uses of cyberspace resources, but we will lose sight of what might be possible"].)

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We discuss this debate among the amici curiae and academic writers only to note its existence and contours, not to attempt its resolution. Creating an absolute property right to exclude undesired communications from one's e-mail and Web servers might help force spammers to internalize the costs they impose on ISP's and their customers. But such a property rule might also create substantial new costs, to e-mail and e-commerce users and to society generally, in lost ease and openness of communication and in lost network benefits. In light of the unresolved controversy, we would be acting rashly to adopt a rule treating computer servers as real property for purposes of trespass law.

The Legislature has already adopted detailed regulations governing UCE. (Bus. & Prof.Code, § § 17538.4, 17538.45; see generally Ferguson v. Friendfinders, Inc., supra, 94 Cal.App.4th 1255, 115 Cal.Rptr.2d 258.) It may see fit in the future also to regulate noncommercial e-mail, such as that sent by Hamidi, or other kinds of unwanted contact between computers on the Internet, such as that alleged in eBay, supra, 100 F.Supp.2d 1058. But we are not persuaded that these perceived problems call at present for judicial creation of a rigid property rule of computer server inviolability. We therefore decline to create an exception, covering Hamidi's unwanted electronic messages to Intel employees, to the general rule that a trespass to chattels is not actionable if it does not involve actual or threatened injury to the personal property or to the possessor's legally protected interest in the personal property. No such injury having been shown on the undisputed facts, Intel was not entitled to summary judgment in its favor.

III. Constitutional Considerations

Because we conclude no trespass to chattels was shown on the summary judgment record, making the injunction improper on common law grounds, we need not address at length the dissenters' constitutional arguments. A few clarifications are nonetheless in order.

Justice Mosk asserts that this case involves only "a private entity seeking to enforce private trespass rights." (Dis. opn. of Mosk, J., post, 1 Cal.Rptr.3d at p. 74, 71 P.3d at p. 331.) But the injunction here was issued by a state court. While a private refusal to transmit another's electronic speech generally does not implicate the First Amendment, because no governmental action is involved (see Cyber Promotions, Inc. v. American Online, Inc. (E.D.Penn.1996) 948 F.Supp. 436, 441-445 [spammer could not force private ISP to carry its messages] ), the use of government power, whether in enforcement of a statute or ordinance or by an award of damages or an injunction in a private lawsuit, is state action that must comply with First Amendment limits. ( Cohen v. Cowles Media Co. (1991) 501 U.S. 663, 668, 111 S.Ct. 2513, 115 L.Ed.2d 586; NAACP v. Claiborne Hardware Co. (1982) 458 U.S. 886, 916, fn. 51, 102 S.Ct. 3409, 73 L.Ed.2d 1215; New York Times v. Sullivan (1964) 376 U.S. 254, 265, 84 S.Ct. 710, 11 L.Ed.2d 686.) Nor does the nonexistence of a "constitutional right to trespass" (dis. opn. of Mosk, J., post, 1 Cal.Rptr.3d at p. 74, 71 P.3d at p. 331) make an injunction in this case per se valid. Unlike, for example, the trespasser-to-land defendant in Church of Christ in Hollywood v. Superior Court (2002) 99 Cal.App.4th 1244, 121 Cal.Rptr.2d 810, Hamidi himself had no tangible presence on Intel property, instead speaking from his own home through his computer. He no more invaded Intel's property than does

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a protester holding a sign or shouting through a bullhorn outside corporate headquarters, posting a letter through the mail, or telephoning to complain of a corporate practice. (See Madsen v. Women's Health Center (1994) 512 U.S. 753, 765, 114 S.Ct. 2516, 129 L.Ed.2d 593 [injunctions restraining such speakers must " burden no more speech than necessary to serve a significant government interest"].) [FN8]

FN8. Justice Brown would distinguish Madsen v. Women's Health Center, supra, on the ground that the operators of the health center in that case would not have been entitled to "drive[ ] [the protesters] from the public streets," whereas Intel was entitled to block Hamidi's messages as best it could. (Dis. opn. of Brown, J., post, 1 Cal.Rptr.3d at p. 55, fn. 1, 71 P.3d at p. 315, fn. 1.) But the health center operators were entitled to block protesters' messages--as best they could--by closing windows and pulling blinds. That a property owner may take physical measures to prevent the transmission of others' speech into or across the property does not imply that a court order enjoining the speech is not subject to constitutional limitations.

Justice Brown relies upon a constitutional "right not to listen," rooted in the listener's "personal autonomy" (dis. opn. of Brown, J., post, 1 Cal.Rptr.3d at p. 58, 71 P.3d at p. 318), as compelling a remedy against Hamidi's messages, which she asserts were sent to "unwilling" listeners (id., at p. 54, 71 P.3d at p. 315). Even assuming a corporate entity could under some circumstances claim such a personal right, here the intended and actual recipients of Hamidi's messages were individual Intel employees, rather than Intel itself. The record contains no evidence Hamidi sent messages to any employee who notified him such messages were unwelcome. In any event, such evidence would, under the dissent's rationale of a right not to listen, support only a narrow injunction aimed at protecting individual recipients who gave notice of their rejection. (See Bolger v. Youngs Drug Products Corp. (1983) 463 U.S. 60, 72, 103 S.Ct. 2875, 77 L.Ed.2d 469 [government may not act on behalf of all addressees by generally prohibiting mailing of materials related to contraception, where those recipients who may be offended can simply ignore and discard the materials]; Martin v. City of Struthers (1943) 319 U.S. 141, 144, 63 S.Ct. 862, 87 L.Ed. 1313 [anti- canvassing ordinance improperly "substitutes the judgment of the community for the judgment of the individual householder"]; cf. Rowan v. U.S. Post Office Dept. (1970) 397 U.S. 728, 736, 90 S.Ct. 1484, 25 L.Ed.2d 736 ["householder" may exercise "individual autonomy" by refusing delivery of offensive mail].) The principle of a right not to listen, founded in personal autonomy, cannot justify the sweeping injunction issued here against all communication to Intel addresses, for such a right, logically, can be exercised only by, or at the behest of, the recipient himself or herself.

DISPOSITION

The judgment of the Court of Appeal is reversed.

WE CONCUR: Kennard, Moreno and Perren [FN*], JJ.

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FN* Associate Justice of the Court of Appeal, Second Appellate District, Division Six, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

Concurring Opinion by KENNARD, J.

I concur.

Does a person commit the tort of trespass to chattels by making occasional personal calls to a mobile phone despite the stated objection of the person who owns the mobile phone and pays for the mobile phone service? Does it matter that the calls are not made to the mobile phone's owner, but to another person who ordinarily uses that phone? Does it matter that the person to whom the calls are made has not objected to them? Does it matter that the calls do not damage the mobile phone or reduce in any significant way its availability or usefulness?

The majority concludes, and I agree, that using another's equipment to communicate with a third person who is an authorized user of the equipment and who does not object to the communication is trespass to chattels only if the communications damage the equipment or in some significant way impair its usefulness or availability.

Intel has my sympathy. Unsolicited and unwanted bulk e-mail, most of it commercial, is a serious annoyance and inconvenience for persons who communicate electronically through the Internet, and bulk e-mail that distracts employees in the workplace can adversely affect overall productivity. But, as the majority persuasively explains, to establish the tort of trespass to chattels in California, the plaintiff must prove either damage to the plaintiff's personal property or actual or threatened impairment of the plaintiff's ability to use that property. Because plaintiff Intel has not shown that defendant Hamidi's occasional bulk e-mail messages to Intel's employees have damaged Intel's computer system or impaired its functioning in any significant way, Intel has not established the tort of trespass to chattels.

This is not to say that Intel is helpless either practically or legally. As a practical matter, Intel need only instruct its employees to delete messages from Hamidi without reading them and to notify Hamidi to remove their workplace e-mail addresses from his mailing lists. Hamidi's messages promised to remove recipients from the mailing list on request, and there is no evidence that Hamidi has ever failed to do so. From a legal perspective, a tort theory other than trespass to chattels may provide Intel with an effective remedy if Hamidi's messages are defamatory or wrongfully interfere with Intel's economic interests. (See maj. opn., ante, 1 Cal.Rptr.3d at p. 37, 71 P.3d at p. 300.) Additionally, the Legislature continues to study the problems caused by bulk e-mails and other dubious uses of modern communication technologies and may craft legislation that accommodates the competing concerns in these sensitive and highly complex areas.

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Accordingly, I join the majority in reversing the Court of Appeal's judgment.

Dissenting Opinion of BROWN, J.

Candidate A finds the vehicles that candidate B has provided for his campaign workers, and A spray paints the water soluble message, "Fight corruption, vote for A" on the bumpers. The majority's reasoning would find that notwithstanding the time it takes the workers to remove the paint and the expense they incur in altering the bumpers to prevent further unwanted messages, candidate B does not deserve an injunction unless the paint is so heavy that it reduces the cars' gas mileage or otherwise depreciates the cars' market value. Furthermore, candidate B has an obligation to permit the paint's display, because the cars are driven by workers and not B personally, because B allows his workers to use the cars to pick up their lunch or retrieve their children from school, or because the bumpers display B's own slogans. I disagree.

Intel has invested millions of dollars to develop and maintain a computer system. It did this not to act as a public forum but to enhance the productivity of its employees. Kourosh Kenneth Hamidi sent as many as 200,000 e-mail messages to Intel employees. The time required to review and delete Hamidi's messages diverted employees from productive tasks and undermined the utility of the computer system. "There may ... be situations in which the value to the owner of a particular type of chattel may be impaired by dealing with it in a manner that does not affect its physical condition." (Rest.2d Torts, § 218, com. h, p. 422.) This is such a case.

The majority repeatedly asserts that Intel objected to the hundreds of thousands of messages solely due to their content, and proposes that Intel seek relief by pleading content-based speech torts. This proposal misses the point that Intel's objection is directed not toward Hamidi's message but his use of Intel's property to display his message. Intel has not sought to prevent Hamidi from expressing his ideas on his Web site, through private mail (paper or electronic) to employees' homes, or through any other means like picketing or billboards. But as counsel for Intel explained during oral argument, the company objects to Hamidi's using Intel's property to advance his message.

Of course, Intel deserves an injunction even if its objections are based entirely on the e-mail's content. Intel is entitled, for example, to allow employees use of the Internet to check stock market tables or weather forecasts without incurring any concomitant obligation to allow access to pornographic Web sites. **314( Loving v. Boren (W.D.Okla. 1997) 956 F.Supp. 953, 955.) A private property owner may choose to exclude unwanted mail for any reason, including its content. ( Rowan v. U.S. Post Office Dept. (1970) 397 U.S. 728, 738, 90 S.Ct. 1484, 25 L.Ed.2d 736 ( Rowan ); Tillman v. Distribution Systems of America Inc. (1996) 224 A.D.2d 79, 648 N.Y.S.2d 630, 635 ( Tillman ). )

The majority refuses to protect Intel's interest in maintaining the integrity of its own system, contending that: (1) Hamidi's mailings did not physically injure the

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system; (2) Intel receives many unwanted messages, of which Hamidi's are but a small fraction; (3) Intel must have contemplated that it would receive some unwanted messages; and (4) Hamidi used the e-mail system for its intended purpose, to communicate with employees.

Other courts have found a protectible interest under very similar circumstances. In Thrifty-Tel v. Bezenek (1996) 46 Cal.App.4th 1559, 54 Cal.Rptr.2d 468 ( Thrifty-Tel ), the Court of Appeal found a trespass to chattels where the defendants used another party's access code to search for an authorization code with which they could make free calls. The defendants' calls did not damage the company's system in any way; they were a miniscule fraction of the overall communication conducted by the phone network; and the company could have reasonably expected that some individuals would attempt to obtain codes with which to make free calls (just as stores expect shoplifters). Moreover, had the defendants succeeded in making free calls, they would have been using the telephone system as intended. ( Id. at p. 1563, 54 Cal.Rptr.2d 468.)

Because I do not share the majority's antipathy toward property rights and believe the proper balance between expressive activity and property protection can be achieved without distorting the law of trespass, I respectfully dissent.

THE INSTANT FINDING OF A TRESPASS CONFORMS THE LAW ON ELECTRONIC MAIL TO THAT

OF OTHER FORMS OF COMMUNICATION

The majority endorses the view of the Court of Appeal dissent, and review a finding of a trespass in this case as a radical decision that will endanger almost every other form of expression. Contrary to these concerns, the Court of Appeal decision belongs not to a nightmarish future but to an unremarkable past--a long line of cases protecting the right of an individual not to receive an unwanted message after having expressed that refusal to the speaker. It breaks no new legal ground and follows traditional rules regarding communication.

It is well settled that the law protects a person's right to decide to whom he will speak, to whom he will listen, and to whom he will not listen. ( Martin v. City of Struthers (1943) 319 U.S. 141, 149, 63 S.Ct. 862, 87 L.Ed. 1313 ( Martin ) [noting the "constitutional rights of those desiring to distribute literature and those desiring to receive it, as well as those who choose to exclude such distributors"].) As the United States Supreme Court observed, "we have repeatedly held that individuals are not required to welcome unwanted speech into their homes" ( Frisby v. Schultz (1988) 487 U.S. 474, 485, 108 S.Ct. 2495, 101 L.Ed.2d 420), whether the unwanted speech comes in the form of a door-to-door solicitor (see Martin, at pp. 147-148, 63 S.Ct. 862), regular "snail" mail ( Rowan, supra, 397 U.S. 728, 90 S.Ct. 1484, 25 L.Ed.2d 736), radio waves ( FCC v. Pacifica Foundation (1978) 438 U.S. 726, 98 S.Ct. 3026, 57 L.Ed.2d 1073), or other forms of amplified sound ( Kovacs v. Cooper (1949) 336 U.S. 77, 69 S.Ct. 448, 93 L.Ed. 513). (See Frisby v. Schultz, at p. 485, 108 S.Ct. 2495.)

Of course, speakers have rights too, and thus the result is a balancing: speakers have the right to initiate speech but the listener has the right to refuse to

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listen or to terminate the conversation. This simple policy thus supports Hamidi's right to send e-mails initially, but not after Intel expressed its objection.

Watchtower Bible and Tract Society v. Village of Stratton (2002) 536 U.S. 150, 122 S.Ct. 2080, 153 L.Ed.2d 205 does not compel a contrary result. Watchtower follows Martin, supra, 319 U.S. 141, 63 S.Ct. 862, 87 L.Ed. 1313, in holding that the government may not bar a speaker from a homeowner's door, but the homeowner surely may. The Martin court invalidated an ordinance that banned all door-to-door soliciting (in that case the speech was the noncommercial ideas of a religious sect), even at homes where the residents wished to hear the speech. This exclusion "substitute[d] the judgment of the community for the judgment of the individual householder." ( Martin, at p. 144, 63 S.Ct. 862.) Instead, the court authorized the property owner to indicate his desire not to be disturbed. " This or any similar regulation leaves the decision as to whether distributers of literature may lawfully call at a home where it belongs--with the homeowner himself." ( Id. at p. 148, 63 S.Ct. 862.) A speaker is entitled to speak with willing listeners but not unwilling ones. "A city can punish those who call at a home in defiance of the previously expressed will of the occupant ...." ( ibid., italics added.) Watchtower, supra, 536 U.S. 150, 122 S.Ct. 2080, 153 L.Ed.2d 205, reaffirmed the listener's complete autonomy to accept or reject offered speech.

Martin further recognized that the decisions regarding whether to accept a particular message must be made by a nongovernmental actor, but not necessarily by every single potential listener on an individual level. "No one supposes ... that the First Amendment prohibits a state from preventing the distribution of leaflets in a church against the will of the church authorities." ( Martin, supra, 319 U.S. at p. 143, 63 S.Ct. 862, italics added.) Unanimity among the congregation is not required. (See also Church of Christ in Hollywood v. Superior Court (2002) 99 Cal.App.4th 1244, 121 Cal.Rptr.2d 810 ( Church of Christ ). ) The Supreme Court reaffirmed this rule in Lloyd Corp. v. Tanner (1972) 407 U.S. 551, 92 S.Ct. 2219, 33 L.Ed.2d 131 ( Lloyd ) and ***55Hudgens v. NLRB (1976) 424 U.S. 507, 96 S.Ct. 1029, 47 L.Ed.2d 196, where private shopping mall owners validly excluded speakers from their malls. The owners could make this decision, even though they were not the "intended and actual recipients of [the speakers'] messages." (Maj. opn., ante, 1 Cal.Rptr.3d at p. 51, 71 P.3d at p. 312.) The owners had no obligation to obtain the agreement of every individual store within the mall, or of every employee within every store in the mall. [FN1]

FN1. The majority distinguishes Church of Christ on its facts, by asserting that a former church member could be barred from church property because she had a "tangible presence" on the church's property. (Maj. opn., ante, 1 Cal.Rptr.3d at p. 50, 71 P.3d at p. 311.) But the majority does not refute the legal point that "the mere judicial enforcement of neutral trespass laws by the private owner of property does not alone render it a state actor." ( CompuServe, Inc. v. Cyber Promotions, Inc. (S.D.Ohio 1997) 962 F.Supp. 1015, 1026 ( CompuServe ). ) The First Amendment does not shield Hamidi's speech, and the majority's authorities do not suggest it does. On the contrary, the high court recognized that the First Amendment does not preclude generally applicable laws, even

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where they incidentally restrict speech. ( Cohen v. Cowles Media Co. (1991) 501 U.S. 663, 669, 111 S.Ct. 2513, 115 L.Ed.2d 586.) There is thus no right to intrude upon privately owned property simply to generate speech. ( Ibid. ) The majority cites New York Times Co. v. Sullivan (1964) 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686, as well as N.A.A.C.P. v. Claiborne Hardware Co. (1982) 458 U.S. 886, 102 S.Ct. 3409, 73 L.Ed.2d 1215, and Madsen v. Women's Health Center, Inc. (1994) 512 U.S. 753, 114 S.Ct. 2516, 129 L.Ed.2d 593, none of which are apposite. In these cases, speakers enjoyed First Amendment protection when they spoke to the public through a newspaper advertisement (with the newspaper's consent) or a protest on a public street, a traditional public forum. ( Schneider v. State (1939) 308 U.S. 147, 60 S.Ct. 146, 84 L.Ed. 155.) If Hamidi had similarly expressed his anti-Intel feelings in a newspaper advertisement or from a public street, these authorities would be on point. By contrast, nothing in New York Times entitles a computer hacker to alter an online newspaper's content so that it expresses the hacker's opinions against the paper's wishes. Intel's right to use reasonable force (see maj. opn., ante, 1 Cal.Rptr.3d at p. 40, 71 P.3d at p. 303), to prevent interference with its property distinguishes this case from the majority's United States Supreme Court precedents. Whereas Intel could attempt to block the unwanted messages, Sullivan, who claimed to have been libeled by the newspaper, could not have burned the newspapers to prevent their publication, nor could the targets of the public protesters in Claiborne Hardware or Madsen have driven them from the public streets where they were speaking. Contrariwise, Intel, as the majority does not dispute, would have been allowed to suppress Hamidi's messages if it had been able to do so.

This rule applies not only to real property but also to chattels like a computer system. In Loving v. Boren, supra, 956 F.Supp. at page 955, the court held that the University of Oklahoma could restrict the use of its computer system to exclude pornographic messages, notwithstanding the contrary preferences of any individual faculty member (or student). Intel may similarly control the use of its own property, regardless of any specific employee's contrary wishes. (See also Bus. & Prof.Code, § 17538.4, subd. (h).) In any event, Hamidi had ample opportunity in his preobjection e-mails to direct employees to his Web site or request the employees' private e-mail addresses. He thus continues to use the internal Intel network to speak to an unreceptive audience. [FN2]

FN2. Hamidi required employees to take affirmative steps to remove themselves from the mailing list. Not only might some employees have declined to do so because such removal might involve a greater burden than simply deleting the unwanted message, but they also might reasonably have assumed that such requests could be counterproductive. (Whang, An Analysis of California's Common and Statutory Law Dealing with Unsolicited Commercial Electronic Mail: An Argument for Revision (2000) 37 San Diego L.Rev. 1201, 1205-1206 (Whang).) " 'Don't respond [to spam]! Don't ask them to "take you off a list." People who respond--even negatively--are viewed as Grade A targets. You will probably get more junk than ever.' " ( Id.

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at p. 1206 & fn. 24, quoting Campbell, Waging War on Internet Spammers, Toronto Star (Aug. 26, 1999) p. L5.)

Accordingly, all that matters is that Intel exercised the right recognized in Martin to exclude unwanted speech. The instant case is considerably easier than Lloyd and Hudgens in light of the severe infringement on Intel's autonomy. Whereas the mall owners had been asked merely to allow others to speak, Intel, through its server, must itself actively "participate in the dissemination of an ideological message by displaying it on ... private property in a manner and for the express purpose that it be observed and read...." ( Wooley v. Maynard (1977) 430 U.S. 705, 713, 97 S.Ct. 1428, 51 L.Ed.2d 752.)

The principle that a speaker's right to speak to a particular listener exists for only so long as the listener wishes to listen applies also to mail delivery. ( Rowan, supra, 397 U.S. 728, 90 S.Ct. 1484, 25 L.Ed.2d 736.) In Bolger v. Youngs Drug Products Corp. (1983) 463 U.S. 60, 103 S.Ct. 2875, 77 L.Ed.2d 469 ( Bolger ), the court struck down a law barring the mailing of information regarding contraception because the government was deciding which messages could be delivered. But Bolger cited Rowan with approval--a case that upheld the procedure by which private parties could refuse to receive specific materials. "[A] sufficient measure of individual autonomy must survive to permit every householder to exercise control over unwanted mail." ( Rowan, supra, 397 U.S. at p. 736, 90 S.Ct. 1484.) Citing Martin, supra, 319 U.S. 141, 63 S.Ct. 862, 87 L.Ed. 1313, Rowan held "a mailer's right to communicate must stop at the mailbox of an unreceptive addressee.... [¶ ] ... [¶ ] To hold less would tend to license a form of trespass." ( Rowan, at pp. 736-737, 90 S.Ct. 1484, italics added.) Furthermore, Bolger expressly contemplated that some family members would exclude materials on behalf of others; the right to accept or reject speech thus belonged to the household, not each individual member. ( Bolger, at p. 73, 103 S.Ct. 2875.)

The pertinent precedent for an anti-spam case is Rowan, which involved private action, not Bolger, which involved governmental action. " '[H]ere we are not dealing with a government agency which seeks to preempt in some way the ability of a publisher to contact a potential reader; rather, we are dealing with a reader who is familiar with the publisher's product, and who is attempting to prevent the unwanted dumping of this product on his property." ( CompuServe, supra, 962 F.Supp. at p. 1027, quoting Tillman, supra, 648 N.Y.S.2d at p. 635.)

Rowan further held the recipient could reject a message for any subjective reason, including annoyance or discomfort at its content. ( Rowan, supra, 397 U.S. at p. 738, 90 S.Ct. 1484.) A private actor thus has no obligation to hear all messages just because he chooses to hear some. A homeowner's desire to receive letters from relatives or friends does not compel him to accept offensive solicitations. It is therefore possibly true but certainly immaterial that Intel might have expected that some unwanted messages would be sent to its employees. A store that opens its doors to the public should reasonably expect some individuals will attempt to shoplift, but the store does not thereby incur an obligation to accept their presence and the disruption they cause.

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If we did create an "accept one, accept all" rule, whereby a party's acceptance of outside mail abrogates the right to exclude any messages, the result would likely be less speech, not more. Courts have recognized the seeming paradox that permitting the exclusion of speech is necessary to safeguard it. "It is ironic that if defendants were to prevail on their First Amendment arguments, the viability of electronic mail as an effective means of communication for the rest of society would be put at risk." ( CompuServe, supra, 962 F.Supp. at p. 1028.) The Court of Appeal below likewise observed that employers' tolerance for reasonable personal use of computers "would vanish if they had no way to limit such personal usage of company equipment." (Cf. *1373Miami Herald Publishing Co. v. Tornillo (1974) 418 U.S. 241, 256, 94 S.Ct. 2831, 41 L.Ed.2d 730 [compulsory fair reply law would deter newspaper from speaking to avoid forced expression of disagreeable speech].) Furthermore, merely permitting exclusion may be insufficient absent a mechanism for enforcement. If spamming expands to a new volume of activity, "[t]he cost increases that would result from a massive increase in volume could even lead many sites to discontinue supporting standard e-mail altogether. Within a few years, e-mail may no longer be the near-universal method for communicating with people via the Internet that it is today." (Sorkin, Technical and Legal Approaches to Unsolicited Electronic Mail (2001) 35 U.S.F. L.Rev. 325, 338 339, fn. omitted (Sorkin).)

The majority expresses its agreement with the dissent below, which found that if the lost productivity of Intel's employees serves as the requisite injury, "then every unsolicited communication that does not further the business's objectives (including telephone calls) interferes with the chattel.... [¶ ] ... [¶ ] ... Under Intel's theory, even lovers' quarrels could turn into trespass suits by reason of the receipt of unsolicited letters or calls from the jilted lover. Imagine what happens after the angry lover tells her fiancé not to call again and violently hangs up the phone. Fifteen minutes later the phone rings. Her fiancé wishing to make up? No, trespass to chattel." But just as private citizens may deny access to door-to-door solicitors or mailers, they may also maintain the integrity of their phone system from callers they wish to exclude. A telephone, no less than an envelope, may be an instrument of trespass. (See Thrifty-Tel, Inc., supra, 46 Cal.App.4th at pp. 1566-1567, 54 Cal.Rptr.2d 468.)

Individuals may not commandeer the communications systems of unwilling listeners, even if the speakers are jilted lovers who wish to reconcile. ( People v. Miguez (Crim.Ct.1990) 147 Misc.2d 482, 556 N.Y.S.2d 231.) [FN3] The Miguez defendant repeatedly left messages [FN4] on the complainant's answering machine and pager, "interrupting him in his professional capacity as a doctor." ( Id. at p. 232.) It was the disruptive volume (not the specific content) of calls from which the complainant was entitled to relief. Similarly, an individual could not lawfully telephone a police department 28 times in 3 hours and 20 minutes to inquire about a civil matter where the police told him not to call because he was disrupting police operations. (People v. Smith (App.Div.1977) 89 Misc.2d 789, 392 N.Y.S.2d 968, 969- 970.)

FN3. New York further proscribes such conduct as criminal. ( People v. Miguez, supra, 147 Misc.2d 482, 556 N.Y.S.2d 231.)

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FN4. Some of the messages reflected a desire to reconcile: " ' "Please don't hurt me anymore. You've hurt me enough, I still love you." ' " A later call stated, " ' "Eddie I want to give you my number; even if you don't call me I want you to have it." ' " ( People v. Miguez, supra, 556 N.Y.S.2d at p. 232.)

The law on faxes is even stricter. As faxes shift the costs of speech from the speaker to the listener, senders of commercial e-mail must obtain prior consent from the recipient. (47 U.S.C. § 227.) Likewise, the users of automated telephone dialers also must obtain prior consent where they result in costs to the recipient. (47 U.S.C. § 227(b)(1)(A)(iii); Missouri ex. rel. Nixon v. American Blast Fax, Inc. (8th Cir.2003) 323 F.3d 649, 657 ( Blast Fax ). ) Because e-mail permits mass unwanted communications without the sender having to bear the costs of postage or labor, there is a much greater incentive for sending unwanted e-mail, and thus the potential volume of unwanted e-mail may create even greater problems for recipients than the smaller volume of unwanted faxes. (Whang, supra, 37 San Diego L.Rev. at p. 1216 & fn. 112.) In any event, honoring the wishes of a party who requests the cessation of unwanted telecommunications, whether by phone, fax or e-mail, does nothing more than apply Martin to today's technology. (Shannon, Combating Unsolicited Sales Calls: The "Do-Not-Call" Approach to Solving the Telemarketing Problem (2001) 27 J. Legis. 381, 394.)

Therefore, before the listener objects, the speaker need not fear he is trespassing. Afterwards, however, the First Amendment principle of respect for personal autonomy compels forbearance. "The Court has traditionally respected the right of a householder to bar, by order or notice, [speakers] from his property. See Martin v. City of Struthers, supra,.... In this case the mailer's right to communicate is circumscribed only by an affirmative act of the addressee giving notice that he wishes no further mailings from that mailer." ( Rowan, supra, 397 U.S. at p. 737, 90 S.Ct. 1484, italics added.) Speakers need not obtain affirmative consent before speaking, and thus have no reason to fear unexpected liability for trespass, but they must respect the decisions of listeners once expressed. The First Amendment protects the right not to listen just as it protects the right to speak.

THE TRIAL COURT CORRECTLY ISSUED THE INJUNCTION

Intel had the right to exclude the unwanted speaker from its property, which Hamidi does not dispute; he does not argue that he has a to right force unwanted messages on Intel. The instant case thus turns on the question of whether Intel deserves a remedy for the continuing violation of its rights. I believe it does, and as numerous cases have demonstrated, an injunction to prevent a trespass to chattels is an appropriate means of enforcement.

The majority does not find that Hamidi has an affirmative right to have Intel transmit his messages, but denies Intel any remedy. Admittedly, the case would be easier if precise statutory provisions supported relief, but in the rapidly changing world of technology, in which even technologically savvy providers like America Online and CompuServe are one step behind spammers, the Legislature will likely

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remain three or four steps behind. In any event, the absence of a statutory remedy does not privilege Hamidi's interference with Intel's property. Nor are content-based speech torts adequate for violations of property rights unrelated to the speech's content. In any event, the possibility of another avenue for relief does not preclude an injunction for trespass to chattels.

The majority denies relief on the theory that Intel has failed to establish the requisite actual injury. As discussed, post, however, the injunction was properly granted because the rule requiring actual injury pertains to damages, not equitable relief, and thus courts considering comparable intrusions have provided injunctive relief without a showing of actual injury. Furthermore, there was actual injury as (1) Intel suffered economic loss; (2) it is sufficient for the injury to impair the chattel's utility to the owner rather than the chattel's market value; and (3) even in the absence of any injury to the owner's utility, it is nevertheless a trespass where one party expropriates for his own use the resources paid for by another.

Harmless Trespasses to Chattels May be Prevented

Defendant Hamidi used Intel's server in violation of the latter's demand to stop. This unlawful use of Intel's system interfered with the use of the system by Intel employees. This misconduct creates a cause of action. "[I]t is a trespass to damage goods or destroy them, to make an unpermitted use of them, or to move them from one place to another." (Prosser & Keeton on Torts (5th ed. 1984) Trespass to Chattels, § 14, p. 85, fns. omitted & italics added.) "[T]he unlawful taking away of another's personal property, the seizure of property upon a wrongful execution, and the appropriation of another's property to one's own use, even for a temporary purpose, constitute trespasses, although a mere removal of property without injuring it is not a trespass when done by one acting rightfully." (7 Speiser et al., American Law of Torts (1990) Trespass, § 23:23, p. 667 (Speiser) fns. omitted & italics added.)

Regardless of whether property is real or personal, it is beyond dispute that an individual has the right to have his personal property free from interference. There is some division among authorities regarding the available remedy, particularly whether a harmless trespass supports a claim for nominal damages. The North Carolina Court of Appeal has found there is no damage requirement for a trespass to chattel. (See Hawkins v. Hawkins (1991) 101 N.C.App. 529, 400 S.E.2d 472, 475.) "A trespass to chattels is actionable per se without any proof of actual damage. Any unauthorized touching or moving of a chattel is actionable at the suit of the possessor of it, even though no harm ensues." (Salmond & Heuston, The Law of Torts (21st ed. 1996) Trespass to Goods, § 6.2, p. 95, fns. omitted.) Several authorities consider a harmless trespass to goods actionable per se only if it is intentional. (Winfield & Jolowicz on Torts (10th ed. 1975) Trespass to Goods, p. 403 (Winfield & Jolowicz); Clerk & Lindsell on Torts (17th ed.1995) ¶ 13-159, p. 703.) The Restatement Second of Torts, section 218, which is less inclined to favor liability, likewise forbids unauthorized use and recognizes the inviolability of personal property. However, the Restatement permits the owner to prevent the injury beforehand, or receive compensation afterward, but not to profit from the trespass through the remedy of damages unrelated to actual harm, which could result in a windfall. ( Thrifty-Tel, supra, 46 Cal.App.4th at p. 1569, 54 Cal.Rptr.2d

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468; Whang, supra, 37 San Diego L.Rev. at p. 1223.) "The interest of a possessor of a chattel in its inviolability, unlike the similar interest of a possessor of land, is not given legal protection by an action for nominal damages for harmless intermeddlings with the chattel.... Sufficient legal protection of the possessor's interest in the mere inviolability of his chattel is afforded by his privilege to use reasonable force to protect his possession against even harmless interference." (Rest.2d Torts, § 218, com. e, pp. 421-422, italics added.) Accordingly, the protection of land and chattels may differ on the question of nominal damages unrelated to actual injury. The authorities agree, however, that (1) the chattel is inviolable, (2) the trespassee need not tolerate even harmless interference, and (3) the possessor may use reasonable force to prevent it. Both California law and the Restatement authorize reasonable force regardless of whether the property in question is real or personal. (Civ.Code, § 51; Rest.2d Torts, § 77.)

The law's special respect for land ownership supports liability for damages even without actual harm. (Speiser, supra, § 23:1, at p. 592.) By contrast, one who suffers interference with a chattel may prevent the interference before or during the fact, or recover actual damages (corresponding to the harm suffered), but at least according to the Restatement, may not recover damages in excess of those suffered. But the Restatement expressly refutes defendant's assertion that only real property is inviolable. From the modest distinction holding that only victims of a trespass to land may profit in the form of damages exceeding actual harm, defendant offers the position that only trespasses to land may be prevented. The law is to the contrary; numerous cases have authorized injunctive relief to safeguard the inviolability of personal property.

The law favors prevention over posttrespass recovery, as it is permissible to use reasonable force to retain possession of a chattel but not to recover it after possession has been lost. (See 1 Dobbs, The Law of Torts (2001) § § 76, 81, pp. 170, 186; see also Deevy v. Tassi (1942) 21 Cal.2d 109, 118-119, 130 P.2d 389.) Notwithstanding the general rule that injunctive relief requires a showing of irreparable injury (5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 782, p. 239), Witkin also observes there are exceptions to this rule where injunctive relief is appropriate; these include repetitive trespasses. (Id., § 784, p. 242.) The first case cited in that section, Mendelson v. McCabe (1904) 144 Cal. 230, 77 P. 915 ( Mendelson ), is apposite to our analysis.

In entering McCabe's property, Mendelson exceeded the scope of the consent he received to do so. McCabe had granted Mendelson the right to pass through his property on condition that Mendelson close the gates properly, which he did not do. ( Mendelson, supra, 144 Cal. at pp. 231-232, 77 P. 915.) McCabe "did not allege that any actual damage had been caused by the acts of [Mendelson] ... in leaving the gates open." ( Id. at p. 232, 77 P. 915.) After finding that Mendelson planned to continue his conduct over McCabe's objection, we authorized injunctive relief. ( Id. at pp. 233-234, 77 P. 915.) Our analysis in Mendelson applies here as well. "The right to an injunction is not always defeated by the mere absence of substantial damage from the acts sought to be enjoined. The acts of the plaintiff in leaving the gates open, if persisted in as he threatened, will constitute a continual invasion of the right of the defendant to maintain the gates.... Moreover, the only remedy, other than that of an injunction, for the injury arising from such continued trespass,

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would be an action against the plaintiff for damages upon each occasion when he left the gates open. The damage in each case would be very small, probably insufficient to defray the expenses of maintaining the action not recoverable as costs. Such remedy is inadequate and would require numerous petty suits, which it is not the policy of the law to encourage." ( Id. at pp. 232-233, 77 P. 915.)

Our decision thus noted that injunctive relief was proper, regardless of actual injury (1) if it is necessary to protect the trespassee's right to control his property, or (2) if suits for damages are impractical, because no individual suit would be worthwhile. Accordingly, we reiterated the rule that " '[a] trespass of a continuing nature, whose constant recurrence renders the remedy at law inadequate, unless by a multiplicity of suits, affords sufficient ground for relief.' " ( Mendelson, supra, 144 Cal. at p. 233, 77 P. 915.) Both Mendelson grounds support an injunction here.

"Injunction is a proper remedy against threatened repeated acts of trespass ... particularly where the probable injury resulting therefrom will be 'beyond any method of pecuniary estimation,' and for this reason irreparable." [FN5] ( Uptown Enterprises v. Strand (1961) 195 Cal.App.2d 45, 52, 15 Cal.Rptr. 486; see also id. at p. 52, 15 Cal.Rptr. 486 [an otherwise lawful "entry for the purpose of harassing the owner, giving his business a bad reputation ... or unjustifiably interfering with the business relations between him and his patrons is unauthorized, wrongful and actionable"].) Although Mendelson and Uptown Enterprises concerned real property, the principles of safeguarding a party's possessory interest in property and of not encouraging repetitive litigation apply no less to trespasses to chattels. Accordingly, several courts have issued injunctive relief to prevent interference with personal property.

FN5. The majority asserts Intel was not deprived of its computers "for any measurable length of time" (maj. opn., ante, 1 Cal.Rptr.3d at p. 41, 71 P.3d at p. 303), which supposedly fits this case within the rule that a " 'mere momentary or theoretical' " deprivation is insufficient to establish a trespass to chattel (maj. opn., ante, at p. 44, 71 P.3d at p. 306). There is a chasm between the two descriptions. The time needed to identify and delete 200,000 e-mail messages is not capable of precise estimation, but it is hardly theoretical or momentary. Most people have no idea of how many words they spoke yesterday, but that does not render the figure de minimis.

In 1996, the Appellate Division of the New York Supreme Court considered the claim of plaintiff Tillman, who sought to enjoin the unwanted delivery of a newspaper onto his property. ( Tillman, supra, 224 A.D.2d 79, 648 N.Y.S.2d 630.) He offered no specific critique of the newspaper's content, observing only " '[t]here is no reason that we have to clean up [defendant's] mess.' " ( Id. at p. 632.) Citing Rowan, Martin, and Lloyd, the court rejected the defendants' argument "that there is nothing a homeowner can do to stop the dumping on his or her property of pamphlets or newspapers, no matter how offensive they might be," and instead upheld Tillman's right to prevent the mail's delivery, regardless of whether his objection was due to the quantity (volume) or quality (content) of the messages. ( Tillman, at p. 636.) In authorizing injunctive relief, the Tillman court found no need

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to quantify the actual damage created by the delivery; it merely **321 noted that the homeowner should not be forced either "to allow such unwanted newspapers to accumulate, or to expend the time and energy necessary to gather and to dispose of them." ( Ibid. ) Subsequent courts have extended this policy to the delivery of e-mail as well.

The CompuServe court followed Tillman in authorizing an injunction to prevent the delivery of unwanted e-mail messages. ( CompuServe, supra, 962 F.Supp. 1015.) The majority summarily distinguishes CompuServe and its progeny by noting there the "plaintiff showed, or was prepared to show, some interference with the efficient functioning of its computer system." (Maj. opn., ante, 1 Cal.Rptr.3d at p. 42, 71 P.3d at p. 304.) But although CompuServe did note the impairment imposed by the defendant's unsolicited e- mail, this was not part of its holding. Just before beginning its analysis, the court summarized its ruling without mentioning impairment. " [T]his Court holds that where defendants engaged in a course of conduct of transmitting a substantial volume of electronic data in the form of unsolicited e-mail to plaintiff's proprietary computer equipment, where defendants continued such practice after repeated demands to cease and desist, and where defendants deliberately evaded plaintiff's affirmative efforts to protect its computer equipment from such use, plaintiff has a viable claim for trespass to personal property and is entitled to injunctive relief to protect its property." ( CompuServe, supra, 962 F.Supp. at p. 1017.) The cited criteria apply fully to Hamidi's conduct. Likewise, the conclusion of CompuServe's analysis fully applies here: "Defendants' intentional use of plaintiff's proprietary computer equipment exceeds plaintiff's consent and, indeed, continued after repeated demands that defendants cease. Such use is an actionable trespass to plaintiff's chattel." ( Id. at p. 1027.)

Post-CompuServe case law has emphasized that unauthorized use of another's property establishes a trespass, even without a showing of physical damage. "Although eBay appears unlikely to be able to show a substantial interference at this time, such a showing is not required. Conduct that does not amount to a substantial interference with possession, but which consists of intermeddling with or use of another's personal property, is sufficient to establish a cause of action for trespass to chattel." ( eBay, Inc. v. Bidder's Edge, Inc. (N.D.Cal.2000) 100 F.Supp.2d 1058, 1070.) [FN6] "While the eBay decision could be read to require an interference that was more than negligible, ... this Court concludes that eBay, in fact, imposes no such requirement. Ultimately, the court in that case concluded that the defendant's conduct was sufficient to establish a cause of action for trespass not because the interference was 'substantial' but simply because the defendant's conduct amounted to 'use' of Plaintiff's computer." ( Oyster Software, Inc. v. Forms Processing, Inc. (N.D.Cal., Dec. 6, 2001, No. C-00-0724 JCS) 2001 WL 1736382 at *13.) An intruder is not entitled to sleep in his neighbor's car, even if he does not chip the paint.

FN6. The majority asserts eBay does require impairment, because the opinion noted that the wide replication of the defendant's conduct would likely impair the functioning of the plaintiff's system. (Maj. opn., ante, 1 Cal.Rptr.3d at pp. 42-43, 71 P.3d at pp. 305-306.) Of course, the "wide replication" of Hamidi's

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conduct would likely impair Intel's operating system. Accordingly, a diluted "likely impairment through wide replication" standard would favor Intel, not Hamidi.

Hamidi concedes Intel's legal entitlement to block the unwanted messages. The problem is that although Intel has resorted to the cyberspace version of reasonable force, it has so far been unsuccessful in determining how to resist the unwanted use of its system. Thus, while Intel has the legal *1380 right to exclude Hamidi from its system, it does not have the physical ability. It may forbid Hamidi's use, but it can not prevent it.

To the majority, Hamidi's ability to outwit Intel's cyber defenses justifies denial of Intel's claim to exclusive use of its property. Under this reasoning, it is not right but might that determines the extent of a party's possessory interest. Although the world often works this way, the legal system should not.

Intel Suffered Injury

Even if CompuServe and its progeny deem injury a prerequisite for injunctive relief, such injury occurred here. Intel suffered not merely an affront to its dignitary interest in ownership but tangible economic loss. Furthermore, notwithstanding ***63 the calendar's doubts, it is entirely consistent with the Restatement and case law to recognize a property interest in the subjective utility of one's property. Finally, case law further recognizes as actionable the loss that occurs when one party maintains property for its own use and another party uses it, even if the property does not suffer damage as a result.

Intel Suffered Economic Loss

Courts have recognized the tangible costs imposed by the receipt of unsolicited bulk e-mail (UBE). [FN7] Approximately 10 percent of the cost of Internet access arises from the delivery of UBE, because networks must expand to ensure their functioning will not be disturbed by the unwanted messages and must design software to reduce the flood of spam. (Whang, supra, 37 San Diego L.Rev. at pp. 1203 & fn. 10, 1207 & fn. 37.) Especially where bulk e-mailers mask the true content of their messages in the "header" (as Hamidi did), there is a shift in costs from sender to recipient that resembles " 'sending junk mail with postage due or making telemarketing calls to someone's pay-per-minute cellular phone.' " ( Ferguson v. Friendfinders (2002) 94 Cal.App.4th 1255, 1268, 115 Cal.Rptr.2d 258 ( Ferguson ), quoting State v. Heckel (2001) 143 Wash.2d 824, 24 P.3d 404, 410 ( Heckel ). ) E- mail may be cheaper and more efficient than other means of communication, but "[t]here is no constitutional requirement that the incremental cost of sending massive quantities of unsolicited [messages] must be borne by the recipients." ( CompuServe, supra, 962 F.Supp. at p. 1026.)

FN7. There is considerable debate regarding whether "spam" encompasses only unsolicited commercial e-mail (UCE) or all UBE, regardless of its commercial nature. (Sorkin, supra, 35 U.S.F. L.Rev at pp. 333- 335.) Because

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parties object to spam due to its volume rather than the sender's motivation, UBE is a preferable definition. ( Id. at p. 335.) Moreover, as our decision in Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 119 Cal.Rptr.2d 296, 45 P.3d 243 made plain, there is no bright-line distinction between commercial and noncommercial speech. (See also City of Cincinnati v. Discovery Network, Inc. (1993) 507 U.S. 410, 419, 113 S.Ct. 1505, 123 L.Ed.2d 99.)

The Ferguson court noted the tangible economic loss to employers created by unwanted e-mail. "Individuals who receive UCE can experience increased Internet access fees because of the time required to sort, read, discard, and attempt to prevent future sending of UCE. If the individual undertakes this process at work, his or her employer suffers the financial consequences of the wasted time." (Ferguson, supra, 94 Cal.App.4th at p. 1267, 115 Cal.Rptr.2d 258, italics added.) CompuServe likewise observed the recipient of unwanted e-mail must "sift through, at his expense, all of the messages in order to find the ones he wanted or expected to receive." ( CompuServe, supra, 962 F.Supp. at p. 1023, italics added.) Unwanted messages also drain the equipment's processing power, and slow down the transfers of electronic data. ( Id. at pp. 1022, 1028.)

The economic costs of unwanted e-mail exist even if Intel employees, unlike CompuServe subscribers, do not pay directly for the time they spend on the Internet. No such direct costs appear here, only the opportunity costs of lost time. But for Intel, "time is money" nonetheless. One justification for the strict rule against unsolicited faxes is that they "shift costs to the recipients who are forced to contribute ink, paper, wear on their fax machines, as well as personnel time." ( Blast Fax, supra, 323 F.3d at p. 652, italics added.) (In re Johnny M. (2002) 100 Cal.App.4th 1128, 123 Cal.Rptr.2d 316 [vandalism that diverted salaried employees from ordinary duties caused economic loss through lost work product].)

Courts have also recognized the harm produced by unwanted paper mail. Mail sent in violation of a request to stop creates the "burdens of scrutinizing the mail for objectionable material and possible harassment." ( Rowan, supra, 397 U.S. at p. 735, 90 S.Ct. 1484, italics added.) The Tillman court thus held a newspaper could not compel unwilling recipients "to spend their own time or money unwillingly participating in the distribution process by which a newspaper travels from the printing press to its ultimate destination, i.e., disposal." ( Tillman, supra, 648 N.Y.S.2d at p. 636, italics added.) [FN8]

FN8. Citing to Bolger, supra, 463 U.S. at page 72, 103 S.Ct. 2875, for the proposition that the Constitution imposes on recipients the burden of disposing of unwanted mail, is inapposite because, as explained in part I, ante, Bolger involved the government's objections to the delivery, not the objection of a nongovernmental actor like Intel, which, under Rowan, supra, 397 U.S at pages 736-738, 90 S.Ct. 1484, may exclude unwanted mail.

Although Hamidi claims he sent only six e-mails, he sent them to between 8,000 and 35,000 employees, thus sending from 48,000 to 210,000 messages.

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Since it is the effect on Intel that is determinative, it is the number of messages received, not sent, that matters. In any event, Hamidi sent between 48,000 and 210,000 messages; the "six" refers only to the number of distinct texts Hamidi sent. Even if it takes little time to determine the author of a message and then delete it, this process, multiplied hundreds of thousands of times, amounts to a substantial loss of employee time, and thus work product. If Intel received 200,000 messages, and each one could be skimmed and deleted in six seconds, it would take approximately 333 hours, or 42 business days, to delete them all. In other words, if Intel hired an employee to remove all unwanted mail, it would take that individual two entire months to finish. (Cf. Tubbs v. Delk (Mo.Ct.App.1996) 932 S.W.2d 454, 456 ( Tubbs ) [deprivation of access to chattel for " 'less than five minutes' " constitutes actionable trespass, although found justified there].)

Intel's Injury is Properly Related to the Chattel

The majority does not dispute that Intel suffered a loss of work product as a matter of fact, so much as it denies that this loss may constitute the requisite injury as a matter of law. According to the majority, the reduced utility of the chattel to the owner does not constitute a sufficiently cognizable injury, which exists only where the chattel itself suffers injury, i.e., its "market value" falls. The Restatement and related case law are to the contrary.

The Restatement recognizes that the measure of impairment may be subjective; a cognizable injury may occur not only when the trespass reduces the chattel's market value but also when the trespass affects its value to the owner. "In the great majority of cases, the actor's intermeddling with the chattel impairs the value of it to the possessor, as distinguished from the mere affront to his dignity as possessor, only by some impairment of the physical condition of the chattel. There may, however, be situations in which the value to the owner of a particular type of chattel may be impaired by dealing with it in a manner that does not affect its physical condition." (Rest.2d Torts, § 218, com. h, p. 422.)

The Restatement goes on to explain that A's using B's toothbrush could extinguish its value to B. The brushing constitutes a trespass by impairing the brush's subjective value to the owner rather than its objective market value. (Rest.2d Torts, § 218, com. h, p. 422.) Moreover, there can be a trespass even though the chattel is used as intended--to brush teeth--if it is used by an unwanted party.

As the Court of Appeal's opinion below indicated, interference with an owner's ability to use the chattel supports a trespass. The opinion recalled the rule, which dates back almost 400 years, holding that chasing an owner's animal amounts to a trespass to chattels. (See, e.g., Farmer v. Hunt (1610) 123 Eng. Rep. 766; Winfield & Jolowicz, supra, Trespass to Goods, p. 403.) These authorities do not require injury or damage to the animal; the interference with the owner's use of the animal suffices to create a trespass. (Winfield & Jolowicz, at p. 40.) Interference is actionable if it "deprives the possessor of the use of that chattel." (Fleming, The Law of Torts (9th ed. 1998) Trespass, § 4.1, p. 598.) Moreover, such interference need not permanently deny the owner the ability to use the chattel--mere delay is enough. (See Tubbs, supra, 932 S.W.2d at p. 456.)

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A contemporary version of this interference would occur if a trespasser unplugged the computers of the entire Intel staff and moved them to a high shelf in each employee's office or cubicle. The computers themselves would suffer no damage, but all 35,000 employees would need to take the time to retrieve their computers and restart them. This would reduce the computers' utility to Intel, for, like the chased animals, they would not be available for immediate use. If the chasing of a few animals supports a trespass, then so does even minimal interference with a system used by 35,000 individuals.

CompuServe is in accord, as it observed how a bundle of unwanted messages decreased the utility of the server. ( CompuServe, supra, 962 F.Supp. at p. 1023.) Here, Intel maintains a possessory interest in the efficient and productive use of its system--which it spends millions of dollars to acquire and maintain. Hamidi's conduct has impaired the system's optimal functioning for Intel's business purposes. As the Restatement supports liability where "harm is caused to ... some ... thing in which the possessor has a legally protected interest" (Rest.2d Torts, § 218, subd. (d)), Hamidi has trespassed upon Intel's chattel.

The Unlawful Use of Another's Property is a Trespass, Regardless of Its Effecton the Property's Utility to the Owner

Finally, even if Hamidi's interference did not affect the server's utility to Intel, it would still amount to a trespass. Intel has poured millions of dollars into a resource that Hamidi has now appropriated for his own use. As noted above, "the appropriation of another's property to one's own use, even for a temporary purpose, constitute[s][a] trespass[ ]." (Speiser, supra, § 23:23, p. 667, fn. omitted.) The use by one party of property whose costs have been paid by another amounts to an unlawful taking of those resources--even if there is no unjust enrichment by the trespassing party.

In Buchanan Marine Inc. v. McCormack Sand Co. (E.D.N.Y.1990) 743 F.Supp. 139 ( Buchanan ), the plaintiff built and maintained mooring buoys for use by its own tugboats. Defendants' barges used the buoy over plaintiff's objection. ( Id. at pp. 140-141.) The federal district court found such unlawful use could constitute a trespass to chattels (if the facts were proved), and thus denied the defendants' motion for summary judgment. "[D]efendants' meddling with [the buoy] is either a trespass to a chattel or perhaps a conversion for which [plaintiff] may seek relief in the form of damages and an injunction." ( Id. at pp. 141-142.) There was an allegation of damage (to plaintiff's barge, not the buoy itself), which could support a claim for damages, but this was not a prerequisite for injunctive relief. Even if defendants did not injure the buoys in any way, they still had no right to expropriate plaintiff's property for their own advantage.

The instant case involves a similar taking. Intel has paid for thousands of computers, as well as the costs of maintaining a server. [FN9] Like the Buchanan defendants, Hamidi has likewise acted as a free rider in enjoying the use of not only Intel's computer system but the extra storage capacity needed to accommodate his messages. Furthermore, Intel's claim, which does not object to Hamidi's speaking independently, [FN10] only to his use of Intel's property, resembles that of the

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Buchanan plaintiff who "has not sought to prevent others from placing their own mooring buoys in the Harbor," but only the use of the plaintiff's property. [FN11] ( Buchanan, supra, 743 F.Supp. at p. 142.) Hamidi has thus unlawfully shifted the costs of his speaking to Intel. ( Ferguson, supra, 94 Cal.App.4th at p. 1268, 115 Cal.Rptr.2d 258; Blast Fax, supra, 323 F.3d at p. 652; Heckel, supra, 24 P.3d at p. 410.)

FN9. In fact, Intel pays to maintain a high capacity to ensure that the system does not crash (or slow down); if Intel had not preempted such harm, there is no dispute that Hamidi would be liable for damages. As Professor Epstein cogently observes, Intel is thus being penalized for engaging in preemptive self-help. According to the majority, Intel would do better by saving its money and collecting damages after a crash/slowdown.

FN10. Intel does not object to Hamidi's transmitting the same message through his Web site, e-mail to employees' home computers, snail mail to their homes, distribution of materials from outside the company's gates, or any other communication that does not conscript Intel's property into Hamidi's service. Intel does object to the use of its property, regardless of its message. Although Intel objected that Hamidi sent antagonistic messages, Intel would presumably also object if Hamidi sent "blank" messages that slowed down both the Intel system and the employees who use it.

FN11. As with the hypothetical toothbrush, the Buchanan defendants used the buoy for its intended use. ( Buchanan, supra, 743 F.Supp. at p. 140.)

Moreover, even such free ridership is not necessary to establish a trespass to chattels. Had the Thrifty-Tel defendants succeeded in making free telephone calls without authorization, they would stand in the same position as the Buchanan defendants. But the record does not show they ever succeeded in making calls for which another subscriber (or the phone company itself) would have to pay. Thus, neither injury to the trespassee nor benefit to the trespasser is an element of trespass to chattel. "[T]respass to chattel has evolved considerably from its original common law application-- concerning the asportation of another's tangible property--to include even the unauthorized use of personal property." ( Thrifty-Tel, supra, 46 Cal.App.4th at p. 1566, 54 Cal.Rptr.2d 468.)

As in those cases in which courts have granted injunctions to prevent the delivery of unwanted mail, paper or electronic, Intel is not attempting to profit from its trespass action by receiving nominal damages. Rather, it seeks an injunction to prevent further trespass. Moreover, Intel suffered the requisite injury by losing a great deal of work product, a harm properly related to the property itself, as well as the money it spent in maintaining the system, which Hamidi wrongfully expropriated.

CONCLUSION

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Those who have contempt for grubby commerce and reverence for the rarified heights of intellectual discourse may applaud today's decision, but even the flow of ideas will be curtailed if the right to exclude is denied. As the Napster controversy revealed, creative individuals will be less inclined to develop intellectual property if they cannot limit the terms of its transmission. Similarly, if online newspapers cannot charge for access, they will be unable to pay the journalists and editorialists who generate ideas for public consumption.

This connection between the property right to objects and the property right to ideas and speech is not novel. James Madison observed, "a man's land, or merchandize, or money is called his property." (Madison, Property, Nat. Gazette (Mar. 27, 1792), reprinted in The Papers of James Madison (Robert A. Rutland et al. edits.1983) p. 266, quoted in McGinnis, The Once and Future Property-Based Vision of the First Amendment (1996) 63 U.Chi. L.Rev. 49, 65.) Likewise, "a man has a property in his opinions and the free communication of them." (Ibid.) Accordingly, "freedom of speech and property rights were seen simply as different aspects of an indivisible concept of liberty." ( Id. at p. 63.)

The principles of both personal liberty and social utility should counsel us to usher the common law of property into the digital age.

Dissenting Opinion by MOSK, J. [FN*]

FN* Associate Justice, Court of Appeal, Second Appellate District, Division Five, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

The majority hold that the California tort of trespass to chattels does not encompass the use of expressly unwanted electronic mail that causes no physical damage or impairment to the recipient's computer system. They also conclude that because a computer system is not like real property, the rules of trespass to real property are also inapplicable to the circumstances in this case. Finally, they suggest that an injunction to preclude mass, noncommercial, unwelcome e-mails may offend the interests of free communication.

I respectfully disagree and would affirm the trial court's decision. In my view, the repeated transmission of bulk e-mails by appellant Kourosh Kenneth Hamidi (Hamidi) to the employees of Intel Corporation (Intel) on its proprietary confidential e-mail lists, despite Intel's demand that he cease such activities, constituted an actionable trespass to chattels. The majority fail to distinguish open communication in the public "commons" of the Internet from unauthorized intermeddling on a private, proprietary intranet. Hamidi is not communicating in the equivalent of a town square or of an unsolicited "junk" mailing through the United States Postal Service. His action, in crossing from the public Internet into a private intranet, is more like intruding into a private office mailroom, commandeering the mail cart, and dropping off unwanted broadsides on 30,000 desks. Because Intel's security

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measures have been circumvented by Hamidi, the majority leave Intel, which has exercised all reasonable self-help efforts, with no recourse unless he causes a malfunction or systems "crash." Hamidi's repeated intrusions did more than merely "prompt[ ] discussions between '[e]xcited and nervous managers' and the company's human resource department" (maj. opn., ante, 1 Cal.Rptr.3d at p. 38, 71 P.3d at p. 301); they also constituted a misappropriation of Intel's private computer system contrary to its intended use and against Intel's wishes.

The law of trespass to chattels has not universally been limited to physical damage. I believe it is entirely consistent to apply that legal theory to these circumstances--that is, when a proprietary computer system is being used contrary to its owner's purposes and expressed desires, and self-help has been ineffective. Intel correctly expects protection from an intruder who misuses its proprietary system, its nonpublic directories, and its supposedly controlled connection to the Internet to achieve his bulk mailing objectives-- incidentally, without even having to pay postage.

I

Intel maintains an intranet--a proprietary computer network--as a tool for transacting and managing its business, both internally and for external business communications. [FN1] The network and its servers constitute a tangible entity that has value in terms of the costs of its components and its function in enabling and enhancing the productivity and efficiency of Intel's business operations. Intel has established costly security measures to protect the integrity of its system, including policies about use, proprietary internal e-mail addresses that it does not release to the public for use outside of company business, and a gateway for blocking unwanted electronic mail--a so-called firewall.

FN1. The Oxford English Dictionary defines an intranet as "A local or restricted computer network; spec. a private or corporate network that uses Internet protocols. An intranet may (but need not) be connected to the Internet and be accessible externally to authorized users." (OED Online, new ed., draft entry, Mar. 2003, <http://dictionary.oed.com/> [as of June 30, 2003]; see also Kokka, Property Rights on an Intranet, 3 Spring 1998 J. Tech.L. & Policy 3, WL 3 UFLJTLP 3 at *3, *6 [defining an intranet as "an internal network of computers, servers, routers and browser software designed to organize, secure, distribute and collect information within an organization" which in large organizations generally includes a wide range of services, including e-mail].) Contrary to the majority's assertion, there is nothing incorrect about characterizing Hamidi's unauthorized bulk e-mails as intrusions onto Intel's intranet.

The Intel computer usage guidelines, which are promulgated for its employees, state that the computer system is to be "used as a resource in conducting business. Reasonable personal use is permitted, but employees are reminded that these resources are the property of Intel and all information on these resources is also the property of Intel." Examples of personal use that would not be

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considered reasonable expressly include "use that adversely affects productivity." Employee e-mail communications are neither private nor confidential.

Hamidi, a former Intel employee who had sued Intel and created an organization to disseminate negative information about its employment practices, sent bulk electronic mail on six occasions to as many as 35,000 Intel employees on its proprietary computer system, using Intel's confidential employee e-mail lists and adopting a series of different origination addresses and encoding strategies to elude Intel's blocking efforts. He refused to stop when requested by Intel to do so, asserting that he would ignore its demands: "I don't care. I have grown deaf." Intel sought injunctive relief, alleging that the disruptive effect of the bulk electronic mail, including expenses from administrative and management personnel, damaged its interest in the proprietary nature of its network.

The trial court, in its order granting summary judgment and a permanent injunction, made the following pertinent findings regarding Hamidi's transmission of bulk electronic mail: "Intel has requested that Hamidi stop sending the messages, but Hamidi has refused, and has employed surreptitious means to circumvent Intel's efforts to block entry of his messages into Intel's system.... [¶ ] ... The e-mail system is dedicated for use in conducting business, including communications between Intel employees and its customers and vendors. Employee e-mail addresses are not published for use outside company business.... [¶ ] The intrusion by Hamidi into the Intel e-mail system has resulted in the expenditure of company resources to seek to block his mailings and to address employee concerns about the mailings. Given Hamidi's evasive techniques to avoid blocking, the self help remedy available to Intel is ineffective." The trial court concluded that "the evidence establishes (without dispute) that Intel has been injured by diminished employee productivity and in devoting company resources to blocking efforts and to addressing employees about Hamidi's e-mails." The trial court further found that the "massive" intrusions "impaired the value to Intel of its e-mail system."

The majority agree that an impairment of Intel's system would result in an action for trespass to chattels, but find that Intel suffered no injury. As did the trial court, I conclude that the undisputed evidence establishes that Intel was substantially harmed by the costs of efforts to block the messages and diminished employee productivity. Additionally, the injunction did not affect Hamidi's ability to communicate with Intel employees by other means; he apparently continues to maintain a Web site to publicize his messages concerning the company. Furthermore, I believe that the trial court and the Court of Appeal correctly determined that the tort of trespass to chattels applies in these circumstances.

The Restatement Second of Torts explains that a trespass to a chattel occurs if "the chattel is impaired as to its condition, quality, or value " or if "harm is caused to some ... thing in which the possessor has a legally protected interest." (Rest.2d Torts, § 218, subds. (b) & (d), p. 420, italics added.) As to this tort, a current prominent treatise on the law of torts explains that "[t]he defendant may interfere with the chattel by interfering with the plaintiff's access or use" and observes that the tort has been applied so as "to protect computer systems from electronic invasions by way of unsolicited email or the like." (1 Dobbs, The Law of Torts (2001) § 60, pp. 122 123.) Moreover, "[t]he harm necessary to trigger liability for

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trespass to chattels can be ... harm to something other than the chattel itself." (Id. at pp. 124-125; see also 1 Harper et al., The Law of Torts (3d ed.1996 & 2003 supp.) § 2.3, pp. 2:14-2:18.) The Restatement points out that, unlike a possessor of land, a possessor of a chattel is not given legal protection from harmless invasion, but "the actor" may be liable if the conduct affects "some other and more important interest of the possessor." (Rest.2d Torts, § 218, com. (e), p. 421, italics added.)

The Restatement explains that the rationale for requiring harm for trespass to a chattel but not for trespass to land is the availability and effectiveness of self-help in the case of trespass to a chattel. " Sufficient legal protection of the possessor's interest in the mere inviolability of his chattel is afforded by his privilege to use reasonable force to protect his possession against even harmless interference." (rest.2D torts, § 218, com. (e), p. 422.) obviously, "force" is not available to prevent electronic trespasses. As shown by Intel's inability to prevent Hamidi's intrusions, self-help is not an adequate alternative to injunctive relief.

The common law tort of trespass to chattels does not require physical disruption to the chattel. It also may apply when there is impairment to the "quality" or "value" of the chattel. (Rest.2d Torts, § 218, subd. (b), p. 420; see also id., com. (e), pp. 421-422 [liability if "intermeddling is harmful to the possessor's materially valuable interest in the physical condition, quality, or value of the chattel"].) Moreover, as we held in Zaslow v. Kroenert (1946) 29 Cal.2d 541, 551, 176 P.2d 1, it also applies "[w]here the conduct complained of does not amount to a substantial interference with possession or the right thereto, but consists of intermeddling with or use of or damages to the personal property." [FN2]

FN2. In Zaslow, we observed that when the trespass involves "intermeddling with or use of" another's property, the owner "may recover only the actual damages suffered by reason of the impairment of the property or the loss of its use." ( Zaslow v. Kroenert, supra, 29 Cal.2d at p. 551, 176 P.2d 1.) We did not state that such damages were a requirement for a cause of action; nor did we address the availability of injunctive relief.

Here, Hamidi's deliberate and continued intermeddling, and threatened intermeddling, with Intel's proprietary computer system for his own purposes that were hostile to Intel, certainly impaired the quality and value of the system as an internal business device for Intel and forced Intel to incur costs to try to maintain the security and integrity of its server--efforts that proved ineffective. These included costs incurred to mitigate injuries that had already occurred. It is not a matter of "bootstrapp[ing]" (maj. opn., ante, 1 Cal.Rptr.3d at p. 46, 71 P.3d at p. 308) to consider those costs a damage to Intel. Indeed, part of the value of the proprietary computer system is the ability to exclude intermeddlers from entering it for significant uses that are disruptive to its owner's business operations.

If Intel, a large business with thousands of former employees, is unable to prevent Hamidi from continued intermeddling, it is not unlikely that other outsiders who obtain access to its proprietary electronic mail addresses would engage in similar conduct, further reducing the value of, and perhaps debilitating, the

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computer system as a business productivity mechanism. Employees understand that a firewall is in place and expect that the messages they receive are from senders permitted by the corporation. Violation of this expectation increases the internal disruption caused by messages that circumvent the company's attempt to exclude them. The time that each employee must spend to evaluate, delete or respond to the message, when added up, constitutes an amount of compensated time that translates to quantifiable financial damage. [FN3]

FN3. As the recent spate of articles on "spam"--unsolicited bulk e- mail--suggests, the effects on business of such unwanted intrusions are not trivial. "Spam is not just a nuisance. It absorbs bandwidth and overwhelms Internet service providers. Corporate tech staffs labor to deploy filtering technology to protect their networks. The cost is now widely estimated (though all such estimates are largely guesswork) at billions of dollars a year. The social costs are immeasurable.... [¶ ] 'Spam has become the organized crime of the Internet.' ... '[M]ore and more it's becoming a systems and engineering and networking problem.' " (Gleick, Tangled Up in Spam, N.Y. Times (Feb. 9, 2003) magazine p. 1 < http://www.nytimes.com/2003/02/09/> [as of June 30, 2003]; see also Cooper & Shogren, U.S., States Turn Focus to Curbing Spam, L.A. Times (May 1, 2003) p. A21, col. 2 ["Businesses are losing money with every moment that employees spend deleting"]; Turley, Congress Must Send Spammers a Message, L.A. Times (Apr. 21, 2003) p. B13, col. 5 ["Spam now costs American businesses about $9 billion a year in lost productivity and screening"]; Taylor, Spam's Big Bang! (June 16, 2003) Time magazine, at p. 51 ["The time we spend deleting or defeating spam costs an estimated $8.9 billion a year in lost productivity"].) But the occasional spam addressed to particular employees does not pose nearly the same threat of impaired value as the concerted bulk mailings into one e-mail system at issue here, which mailings were sent to thousands of employees with the express purpose of disrupting business as usual.

All of these costs to protect the integrity of the computer system and to deal with the disruptive effects of the transmissions and the expenditures attributable to employee time, constitute damages sufficient to establish the existence of a trespass to chattels, even if the computer system was not overburdened to the point of a "crash" by the bulk electronic mail.

The several courts that have applied the tort of trespass to chattels to deliberate intermeddling with proprietary computer systems have, for the most part, used a similar analysis. Thus, the court in CompuServe Inc. v. Cyber Promotions, Inc. (S.D.Ohio 1997) 962 F.Supp. 1015, 1022, applied the Restatement to conclude that mass mailings and evasion of the server's filters diminished the value of the mail processing computer equipment to CompuServe "even though it is not physically damaged by defendant's conduct." The inconvenience to users of the system as a result of the mass messages "decrease [d] the utility of CompuServe's e-mail service" and was actionable as a trespass to chattels. ( Id. at p. 1023.)

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The court in America Online, Inc. v. IMS (E.D.Va.1998) 24 F.Supp.2d 548, on facts similar to those in the present case, also applied the Restatement in a trespass to chattels claim. There, defendant sent unauthorized e-mails to America Online's computer system, persisting after receiving notice to desist and causing the company "to spend technical resources and staff time to 'defend' its computer system and its membership" against the unwanted messages. ( Id. at p. 549.) The company was not required to show that its computer system was overwhelmed or suffered a diminution in performance; mere use of the system by the defendant was sufficient to allow the plaintiff to prevail on the trespass to chattels claim.

Similarly, the court in eBay, Inc. v. Bidder's Edge, Inc. (N.D.Cal.2000) 100 F.Supp.2d 1058 determined that there was a trespass to chattels when the quality or value of a computer system was diminished by unauthorized "web crawlers," [FN4] despite the fact that eBay had not alleged any "particular service disruption" ( id. at p. 1065) or "specific incremental damages" ( id. at p. 1063) to the computer system. Intermeddling with eBay's private property was sufficient to establish a cause of action: "A trespasser is liable when the trespass diminishes the condition, quality or value of personal property"; "[e]ven if [defendant's intrusions] use only a small amount of eBay's computer ... capacity, [defendant] has nonetheless deprived eBay of the ability to use that portion of its personal property for its own purposes. The law recognizes no such right to use another's personal property." ( Id. at p. 1071; see also, e.g., Oyster Software, Inc. v. Forms Processing, Inc. (N.D.Cal. Dec. 6, 2001, No. C-00-0724 JCS) 2001 WL 1736382 at *12-*13 [trespass to chattels claim did not require company to demonstrate physical damage]; Register.com, Inc. v. Verio, Inc. (S.D.N.Y.2000) 126 F.Supp.2d 238, 250 [accord]; cf. Thrifty-Tel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559, 1566-1567, 54 Cal.Rptr.2d 468 [unconsented electronic access to a computer system constituted a trespass to chattels].)

FN4. A "web crawler" is a computer program that operates across the Internet to obtain information from the websites of others. ( eBay, Inc. v. Bidder's Edge, supra, 100 F.Supp.2d at p. 1061, fn. 2.)

These cases stand for the simple proposition that owners of computer systems, like owners of other private property, have a right to prevent others from using their property against their interests. That principle applies equally in this case. By his repeated intermeddling, Hamidi converted Intel's private employee e-mail system into a tool for harming productivity and disrupting Intel's workplace. Intel attempted to put a stop to Hamidi's intrusions by increasing its electronic screening measures and by requesting that he desist. Only when self-help proved futile, devolving into a potentially endless joust between attempted prevention and circumvention, did Intel request and obtain equitable relief in the form of an injunction to prevent further threatened injury.

The majority suggest that Intel is not entitled to injunctive relief because it chose to allow its employees access to e-mail through the Internet and because Hamidi has apparently told employees that he will remove them from his mailing list if they so request. They overlook the proprietary nature of Intel's intranet system; Intel's system is not merely a conduit for messages to its employees. As the owner

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of the computer system, it is Intel's request that Hamidi stop that must be respected. The fact that, like most large businesses, Intel's intranet includes external e-mail access for essential business purposes does not logically mean, as the majority suggest, that Intel has forfeited the right to determine who has access to its system. Its intranet is not the equivalent of a common carrier or public communications licensee that would be subject to requirements to provide service and access. Just as Intel can, and does, regulate the use of its computer system by its employees, it should be entitled to control its use by outsiders and to seek injunctive relief when self-help fails.

The majority also propose that Intel has sufficient avenues for legal relief outside of trespass to chattels, such as interference with prospective economic relations, interference with contract, intentional infliction of emotional distress, and defamation; Hamidi urges that an action for nuisance is more appropriate. Although other causes of action may under certain circumstances also apply to Hamidi's conduct, the remedy based on trespass to chattels is the most efficient and appropriate. It simply requires Hamidi to stop the unauthorized use of property without regard to the content of the transmissions. Unlike trespass to chattels, the other potential causes of action suggested by the majority and Hamidi would require an evaluation of the transmissions' content and, in the case of a nuisance action, for example, would involve questions of degree and value judgments based on competing interests. (See Hellman v. La Cumbre Golf & Country Club (1992) 6 Cal.App.4th 1224, 1230-1231, 8 Cal.Rptr.2d 293; 11 Witkin, Summary of Cal. Law (9th ed. 1990) Equity, § 153, p. 833; Rest.2d Torts, § 840D).

II

As discussed above, I believe that existing legal principles are adequate to support Intel's request for injunctive relief. But even if the injunction in this case amounts to an extension of the traditional tort of trespass to chattels, this is one of those cases in which, as Justice Cardozo suggested, "[t]he creative element in the judicial process finds its opportunity and power" in the development of the law. (Cardozo, Nature of the Judicial Process (1921) p. 165.) [FN5]

FN5. "It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV." (Holmes, The Path of the Law (1897) 10 Harv.L.Rev. 457, 469.)

The law has evolved to meet economic, social, and scientific changes in society. The industrial revolution, mass production, and new transportation and communication systems all required the adaptation and evolution of legal doctrines.

The age of computer technology and cyberspace poses new challenges to legal principles. As this court has said, "the so-called Internet revolution has spawned a host of new legal issues as courts have struggled to apply traditional legal frameworks to this new communication medium." ( Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 266, 127 Cal.Rptr.2d 329, 58 P.3d 2.) The court must now grapple with proprietary interests, privacy, and expression arising out of computer-related disputes. Thus, in this case the court is faced with "that balancing of

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judgment, that testing and sorting of considerations of analogy and logic and utility and fairness" that Justice Cardozo said he had "been trying to describe." (Cardozo, Nature of the Judicial Process, supra, at pp. 165-166.) Additionally, this is a case in which equitable relief is sought. As Bernard Witkin has written, "equitable relief is flexible and expanding, and the theory that 'for every wrong there is a remedy' [Civ.Code, § 3523] may be invoked by equity courts to justify the invention of new methods of relief for new types of wrongs." (11 Witkin, Summary of Cal. Law, supra, Equity, § 3, p. 681.) That the Legislature has dealt with some aspects of commercial unsolicited bulk e-mail (Bus. & Prof.Code, § § 17538.4, 17538.45; see maj. opn., ante, 1 Cal.Rptr.3d at p. 50, 71 P.3d at p. 311) should not inhibit the application of common law tort principles to deal with e-mail transgressions not covered by the legislation. (Cf. California Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal.4th 284, 297, 65 Cal.Rptr.2d 872, 940 P.2d 323; I.E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 285, 216 Cal.Rptr. 438, 702 P.2d 596.)

Before the computer, a person could not easily cause significant disruption to another's business or personal affairs through methods of communication without significant cost. With the computer, by a mass mailing, one person can at no cost disrupt, damage, and interfere with another's property, business, and personal interests. Here, the law should allow Intel to protect its computer- related property from the unauthorized, harmful, free use by intruders.

III

As the Court of Appeal observed, connecting one's driveway to the general system of roads does not invite demonstrators to use the property as a public forum. Not mindful of this precept, the majority blur the distinction between public and private computer networks in the interest of "ease and openness of communication." (Maj. opn., ante, 1 Cal.Rptr.3d at p. 50, 71 P.3d at p. 311.) By upholding Intel's right to exercise self-help to restrict Hamidi's bulk e-mails, they concede that he did not have a right to send them through Intel's proprietary system. Yet they conclude that injunctive relief is unavailable to Intel because it connected its e-mail system to the Internet and thus, "necessarily contemplated" unsolicited communications to its employees. (Maj. opn., ante, at p. 47, 71 P.3d at p. 308.) Their exposition promotes unpredictability in a manner that could be as harmful to open communication as it is to property rights. It permits Intel to block Hamidi's e-mails entirely, but offers no recourse if he succeeds in breaking through its security barriers, unless he physically or functionally degrades the system.

By making more concrete damages a requirement for a remedy, the majority has rendered speech interests dependent on the impact of the e-mails. The sender will never know when or if the mass e-mails sent by him (and perhaps others) will use up too much space or cause a crash in the recipient system, so as to fulfill the majority's requirement of damages. Thus, the sender is exposed to the risk of liability because of the possibility of damages. If, as the majority suggest, such a risk will deter "ease and openness of communication" (maj. opn., ante, 1 Cal.Rptr.3d at p. 50, 71 P.3d at p. 311), the majority's formulation does not eliminate such deterrence. Under the majority's position, the lost freedom of communication still exists. In addition, a business could never reliably invest in a private network that

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can only be kept private by constant vigilance and inventiveness, or by simply shutting off the Internet, thus limiting rather than expanding the flow of information. [FN6] Moreover, Intel would have less incentive to allow employees reasonable use of its equipment to send and receive personal e-mails if such allowance is justification for preventing restrictions on unwanted intrusions into its computer system. I believe the best approach is to clearly delineate private from public networks and identify as a trespass to chattels the kind of intermeddling involved here.

FN6. Thus, the majority's approach creates the perverse incentive for companies to invest less in computer capacity in order to protect its property. In the view of the majority, Hamidi's massive e-mails would be actionable only if Intel had insufficient server or storage capacity to manage them.

The views of the amici curiae group of intellectual property professors that a ruling in favor of Intel will interfere with communication are similarly misplaced because here, Intel, contrary to most users, expressly informed appellant that it did not want him sending messages through its system. Moreover, as noted above, all of the problems referred to will exist under the apparently accepted law that there is a cause of action if there is some actionable damage.

Hamidi and other amici curiae raise, for the first time on appeal, certain labor law issues, including the matter of protected labor-related communications. Even assuming that these issues are properly before this court (see Cal. Rules of Court, rule 28(c)(1)), to the extent the laws allow what would otherwise be trespasses for some labor-related communications, my position does not exclude that here too. But there has been no showing that the communications are labor law protected. [FN7]

FN7. The bulk e-mail messages from Hamidi, a nonemployee, did not purport to spur employees into any collective action; he has conceded that "[t]his is not a drive to unionize." Nor was his disruptive conduct part of any bona fide labor dispute.

Finally, with regard to alleged constitutional free speech concerns raised by Hamidi and others, this case involves a private entity seeking to enforce private rights against trespass. Unlike the majority, I have concluded that Hamidi did invade Intel's property. His actions constituted a trespass--in this case a trespass to chattels. There is no federal or state constitutional right to trespass. ( Adderley v. Florida (1966) 385 U.S. 39, 47, 87 S.Ct. 242, 17 L.Ed.2d 149 ["Nothing in the Constitution of the United States prevents Florida from even-handed enforcement of its general trespass statute...."]; Church of Christ in Hollywood v. Superior Court (2002) 99 Cal.App.4th 1244, 1253-1254, 121 Cal.Rptr.2d 810 [affirming a restraining order preventing former church member from entering church property: "[the United States Supreme Court] has never held that a trespasser or an uninvited guest may exercise general rights of free speech on property privately owned"];

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see also CompuServe Inc. v. Cyber Promotions, Inc., supra, 962 F.Supp. at p. 1026 ["the mere judicial enforcement of neutral trespass laws by the private owner of property does not alone render it a state actor"]; Cyber Promotions, Inc. v. American Online, Inc. (E.D.Pa.1996) 948 F.Supp. 436, 456 ["a private company such as Cyber simply does not have the unfettered right under the First Amendment to invade AOL's private property...."].) Accordingly, the cases cited by the majority regarding restrictions on speech, not trespass, are not applicable. Nor does the connection of Intel's e-mail system to the Internet transform it into a public forum any more than any connection between private and public properties. Moreover, as noted above, Hamidi had adequate alternative means for communicating with Intel employees so that an injunction would not, under any theory, constitute a free speech violation. ( Lloyd Corp. v. Tanner (1972) 407 U.S. 551, 568-569, 92 S.Ct. 2219, 33 L.Ed.2d 131.)

IV

The trial court granted an injunction to prevent threatened injury to Intel. That is the purpose of an injunction. ( Ernst & Ernst v. Carlson (1966) 247 Cal.App.2d 125, 128, 55 Cal.Rptr. 626.) Intel should not be helpless in the face of repeated and threatened abuse and contamination of its private computer system. The undisputed facts, in my view, rendered Hamidi's conduct legally actionable. Thus, the trial court's decision to grant a permanent injunction was not "a clear abuse of discretion" that may be "disturbed on appeal." ( Shapiro v. San Diego City Council (2002) 96 Cal.App.4th 904, 912, 117 Cal.Rptr.2d 631; see also City of Vernon v. Central Basin Mun. Water Dist. (1999) 69 Cal.App.4th 508, 516, 81 Cal.Rptr.2d 650 [in an appeal of summary judgment, the trial court's decision to deny a permanent injunction was "governed by the abuse of discretion standard of review"].)

The injunction issued by the trial court simply required Hamidi to refrain from further trespassory conduct, drawing no distinction based on the content of his e-mails. Hamidi remains free to communicate with Intel employees and others outside the walls--both physical and electronic--of the company.

For these reasons, I respectfully dissent.

Notes and Questions

Rex owns “Web Women,” a web site consisting of a collection of hyperlinks to web pages displaying pictures of women.3Maureen A. O’Rourke, Fencing Cyberspace: Drawing Borders in a Virtual World, 82 Minn. L. Rev., 609, 6403 (1998). Web 3 The example is adapted from the “Babes on the Web” controversy:

Babes on the Web was a web site consisting of links to the home pages of certain women whose sites included their photographs. The links were accompanied by a desirability rating. When a number of women objected to their inclusion on the Babes on the Web site, the site’s operator eventually removed the links to the objecting sites.

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Women links to online resumes containing pictures of women; to personal web sites displaying pictures of women on vacation; to the female faculty biographical pages of university web sites, and so on. Rex never copies pictures to his site; he only links. He rates the sites to which he links in terms of attractiveness on a 1 to 10 scale. He collects the links using automated robot search software which he sends to publicly accessible web sites. Vicki and Sally both maintain personal web sites on which they display vacation pictures; each does so to give family and friends easy access to the pictures, and each also thinks that members of the general public trying to choose a vacation spot might find the pictures helpful. In order to allow public access, neither Sally nor Vicki password protects their sites. Rex links to both sites. Vicki is deeply offended; Sally is not, but she does feel exploited. If Rex wants to link to her pictures, Sally wants a licensing fee. It is worth noting that–like Sally–eBay is also concerned with licensing. eBay is quite willing to license other sites to access and search its site and once had granted granted Bidders’ Edge just such a license.4 eBay sued Bidders’ Edge only after negotiations to renew the license agreement broke down.

Vicki and Sally live in a small town where they are among the many who keep albums of their vacation pictures on their front porches so that people may browse through them whenever they like. Rex visits the porches regularly and summarizes his findings on his web site (now called, “Porch Pretties”). The site contains the addresses of the properties where he has found albums to his liking (or disliking), and he displays his 1 - 10 rating next to the address. In this variation, trespass to land and trespass to chattels protect Vicki’s freedom and promote a market exchange between Rex and Sally. Vicki can control access to her pictures by banning Rex from her porch (via trespass to land5); or, if she wants to allow him on the porch, she can prohibit him from opening the album (via trespass to chattels6). Sally can do likewise to ensure that Rex can only look at her pictures if he pays a fee.

Should they be able to do the same in the Internet variation? With regard to

4 eBay’s agreements govern, among other things, “the way in which its licensees can ‘deep link’ to the eBay site; the default display of eBay content on the licensee’s site; the protect and use of eBay’s intellectual property and advertisement content; [and] basic compensation provisions.” eBay v. Bidder’s Edge, Inc., No. C-99-21200 RMW ENE, Brief of Amici Curiae, Reed Elsevier, Inc., The National Association of Realtors and The e-commerce Coalition, Supporting the Affirmance of the Order and Opinion of the District Court 13 (9th Cir. filed July 12, 2000). “In early 1998, eBay gave BE permission to include information regarding eBay-hosted auctions for Beanie Babies and Furbies in the BE database. . . . The parties contemplated . . . . they would reach a formal licensing agreement [allowing a broader range of searches]. They were unable to do so.” eBay supra note 16, at 1062.

5 Intentionally entering land in possession of another without authorization is a trespass. Restatement (Second) of Torts § 158 (1964).

6 Opening the album after being told not to would be an intentional, unauthorized use that impaired value–provided the use was repeated and unpreventable. See supra notes 27 and 31 - 32 and accompanying text.

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freedom and efficiency, the two situations are the same. The Right plays the same role on the Internet that its brick-and-mortar counterparts play in their context; it allows Vicki to control who sees her pictures and turns Sally’s pictures–and the information on eBay–into items for which Sally and eBay can effectively demand a fee. It would be difficult to achieve these results without the Right. If we do not invoke the Right, how are we going to determine the extent to which web site owners have control over their property? Are we going to invent a new approach? It is extraordinarily difficult to regulate appropriately when confronted, as we are on the Internet, with rapid and revolutionary technological, cultural, and economic change.7Ira Magaziner, At the Crossroads of Law and Technology, 33 Loy. L. A. L. Rev. 1165, 1173 (2000). The sensible course is to start with models which are relatively well-understood and whose consequences are predictable with some accuracy; we can then adapt those models to the new situations we confront.

THE BRITISH HORSERACING BOARD LTD v. WILLIAM HILLORGANIZATION LTD. (ECJ 2004)

JUDGMENT:

1. This reference for a preliminary ruling concerns the interpretation of Article 7 and Article 10(3) of Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the legal protection of databases (OJ 1996 L 77, p. 20, >the directive=).2. The reference was made in the course of proceedings brought by The British Horseracing Board Ltd, the Jockey Club and Weatherbys Group Ltd (>the BHB and Others=) against William Hill Organization Ltd (>William Hill=). The litigation arose over the use by William Hill, for the purpose of organising betting on horse racing, of information taken from the BHB database.

Legal background 3. The directive, according to Article 1(1) thereof, concerns the legal protection of databases in any form. A database is defined, in Article 1(2) of the directive, as >a collection of independent works, data or other materials arranged in a systematic or methodical way and individually accessible by electronic or other means=.

7 Ira Magaziner emphasizes this point when commenting on the Clinton administration’s approach to the Internet, he remarks that

one very important principle underlying our Internet policy was to favor private action over governmental action. . . . it seemed to us most prudent to first let private sector leadership try to develop the rules of the road for the Internet through private collective action.” Magaziner’s main reason for this policy is that “the Internet moves too quickly. The processes of government are too slow, inflexible, and bureaucratic to effectively address Internet changes. And we were afraid that the development of the Internet would be strangled by excessive government regulation and intrusion.”

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4. Article 3 of the directive provides for copyright protection for databases which, >by reason of the selection or arrangement of their contents, constitute the author=s own intellectual creation=. 5. Article 7 of the directive provides for a sui generis right in the following terms:

Object of protection1. Member States shall provide for a right for the maker of a database which shows that there has been qualitatively and/or quantitatively a substantial investment in either the obtaining, verification or presentation of the contents to prevent extraction and/or re-utilisation of the whole or of a substantial part, evaluated qualitatively and/or quantitatively, of the contents of that database. 2. For the purposes of this Chapter: (a) Aextraction@ shall mean the permanent or temporary transfer of all or a substantial part of the contents of a database to another medium by any means or in any form; (b) Are-utilisation@ shall mean any form of making available to the public all or a substantial part of the contents of a database by the distribution of copies, by renting, by on-line or other forms of transmission. The first sale of a copy of a database within the Community by the rightholder or with his consent shall exhaust the right to control resale of that copy within the Community; public lending is not an act of extraction or re-utilisation. 3. The right referred to in paragraph 1 may be transferred, assigned or granted under contractual licence. 4. The right provided for in paragraph 1 shall apply irrespective of the eligibility of that database for protection by copyright or by other rights. Moreover, it shall apply irrespective of eligibility of the contents of that database for protection by copyright or by other rights. Protection of databases under the right provided for in paragraph 1 shall be without prejudice to rights existing in respect of their content. 5. The repeated and systematic extraction and/or re-utilisation of insubstantial parts of the contents of the database implying acts which conflict with a normal exploitation of that database or which unreasonably prejudice the legitimate interests of the maker of the database shall not be permitted.

6. Article 8(1) of the directive provides:

>The maker of a database which is made available to the public in whatever manner may not prevent a lawful user of the database from extracting and/or re-utilising insubstantial parts of its contents, evaluated qualitatively and/or quantitatively, for any purposes whatsoever. Where the lawful user is authorised to extract and/or re-utilise only part of the database, this paragraph shall apply only to that part.=

7. Under Article 9 of the directive >Member States may stipulate that lawful users of a database which is made available to the public in whatever manner may,

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without the authorisation of its maker, extract or re-utilise a substantial part of its contents:

(a) in the case of extraction for private purposes of the contents of a non-electronic database; (b) in the case of extraction for the purposes of illustration for teaching or scientific research, as long as the source is indicated and to the extent justified by the non-commercial purpose to be achieved; (c) in the case of extraction and/or re-utilisation for the purposes of public security or an administrative or judicial procedure.=

8. Article 10 of the directive provides:

1. The right provided for in Article 7 shall run from the date of completion of the making of the database. It shall expire 15 years from the first of January of the year following the date of completion. Y 3. Any substantial change, evaluated qualitatively or quantitatively, to the contents of a database, including any substantial change resulting from the accumulation of successive additions, deletions or alterations, which would result in the database being considered to be a substantial new investment, evaluated qualitatively or quantitatively, shall qualify the database resulting from that investment for its own term of protection.

9. The directive was implemented in United Kingdom law by the Copyright and Rights in Databases Regulations 1997 which entered into force on 1 January 1998. The terms of those regulations are identical to those of the directive.

The main proceedings and the questions referred for a preliminary ruling

10. The BHB and Others manage the horse racing industry in the United Kingdom and in various capacities compile and maintain the BHB database which contains a large amount of information supplied by horse owners, trainers, horse race organisers and others involved in the racing industry. The database contains information on inter alia the pedigrees of some one million horses, and >pre-race information= on races to be held in the United Kingdom. That information includes the name, place and date of the race concerned, the distance over which the race is to be run, the criteria for eligibility to enter the race, the date by which entries must be received, the entry fee payable and the amount of money the racecourse is to contribute to the prize money for the race.11. Weatherbys Group Ltd, the company which compiles and maintains the BHB database, performs three principal functions, which lead up to the issue of pre-race information.12. First, it registers information concerning owners, trainers, jockeys and horses and records the performances of those horses in each race.13. Second, it decides on weight adding and handicapping for the horses entered for the various races.14. Third, it compiles the lists of horses running in the races. This activity is carried out by its own call centre, manned by about 30 operators. They record telephone calls entering horses in each race organised. The identity and status of the person

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entering the horse and whether the characteristics of the horse meet the criteria for entry to the race are then checked. Following those checks the entries are published provisionally. To take part in the race, the trainer must confirm the horse=s participation by telephone by declaring it the day before the race at the latest. The operators must then ascertain whether the horse can be authorised to run the race in the light of the number of declarations already recorded. A central computer then allocates a saddle cloth number to each horse and determines the stall from which it will start. The final list of runners is published the day before the race. 15. The BHB database contains essential information not only for those directly involved in horse racing but also for radio and television broadcasters and for bookmakers and their clients. The cost of running the BHB database is approximately ,4 million per annum. The fees charged to third parties for the use of the information in the database cover about a quarter of that amount.16. The database is accessible on the internet site operated jointly by BHB and Weatherbys Group Ltd. Some of its contents are also published each week in the BHB=s official journal. The contents of the database, or of certain parts of it, are also made available to Racing Pages Ltd, a company jointly controlled by Weatherbys Group Ltd and the Press Association, which then forwards data to its various subscribers, including some bookmakers, in the form of a >Declarations Feed=, the day before a race. Satellite Information Services Limited (>SIS=) is authorised by Racing Pages to transmit data to its own subscribers in the form of a >raw data feed= (>RDF=). The RDF includes a large amount of information, in particular, the names of the horses running in the races, the names of the jockeys, the saddle cloth numbers and the weight for each horse. Through the newspapers and the Ceefax and Teletext services, the names of the runners in a particular race are made available to the public during the course of the afternoon before the race.17. William Hill, which is a subscriber to both the Declarations Feed and the RDF, is one of the leading providers of off-course bookmaking services in the United Kingdom, to both UK and international customers. It launched an on-line betting service on two internet sites. Those interested can use these sites to find out what horses are running in which races at which racecourses and what odds are offered by William Hill.18. The information displayed on William Hill=s internet sites is obtained, first, from newspapers published the day before the race and, second, from the RDF supplied by SIS on the morning of the race.19. According to the order for reference, the information displayed on William Hill=s internet sites represents a very small proportion of the total amount of data on the BHB database, given that it concerns only the following matters: the names of all the horses in the race, the date, time and/or name of the race and the name of the racecourse where the race will be held. Also according to the order for reference, the horse races and the lists of runners are not arranged on William Hill=s internet sites in the same way as in the BHB database. 20. In March 2000 the BHB and Others brought proceedings against William Hill in the High Court of Justice of England and Wales, Chancery Division, alleging infringement of their sui generis right. They contend, first, that each day=s use by William Hill of racing data taken from the newspapers or the RDF is an extraction or re-utilisation of a substantial part of the contents of the BHB database, contrary to Article 7(1) of the directive. Secondly, they say that even if the individual extracts

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made by William Hill are not substantial they should be prohibited under Article 7(5) of the directive. 21. The High Court of Justice ruled in a judgment of 9 February 2001 that the action of BHB and Others was well founded. William Hill appealed to the referring court.22. In the light of the problems of interpretation of the directive, the Court of Appeal decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:

(1) May either of the expressions: B Asubstantial part of the contents of the database@; or B Ainsubstantial parts of the contents of the database@ in Article 7 of the directive include works, data or other materials derived from the database but which do not have the same systematic or methodical arrangement of and individual accessibility as those to be found in the database?

(2) What is meant by Aobtaining@ in Article 7(1) of the directive? In particular, are the [facts and matters described above in paragraph 14] capable of amounting to such obtaining?

(3) Is Averification@ in Article 7(1) of the directive limited to ensuring from time to time that information contained in a database is or remains correct?

(4) What is meant in Article 7(1) of the directive, by the expressions: B Aa substantial part, evaluated qualitatively ... of the contents of that database@? and B Aa substantial part, evaluated quantitatively ... of the contents of that database@?

(5) What is meant in Article 7(5) of the directive, by the expression Ainsubstantial parts of the database@?

(6) In particular, in each case: B does Asubstantial@ mean something more than Ainsignificant@ and, if so, what? B does Ainsubstantial@ part simply mean that it is not Asubstantial@?

(7) Is Aextraction@ in Article 7 of the directive limited to the transfer of the contents of the database directly from the database to another medium, or does it also include the transfer of works, data or other materials, which are derived indirectly from the database, without having direct access to the database?

(8) Is Are-utilisation@ in Article 7 of the directive limited to the making available to the public of the contents of the database directly from the database, or does it also include the making available to the public of works, data or other materials which are derived indirectly from the database, without having direct access to the database?

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(9) Is Are-utilisation@ in Article 7 of the directive limited to the first making available to the public of the contents of the database?

(10) In Article 7(5) of the directive what is meant by Aacts which conflict with a normal exploitation of that database or unreasonably prejudice the legitimate interests of the maker of the database@? In particular, are the facts and matters in paragraphs [17 to 19] above in the context of the facts and matters in paragraph [15] above capable of amounting to such acts?

(11) Does Article 10(3) of the directive mean that, whenever there is a Asubstantial change@ to the contents of a database, qualifying the resulting database for its own term of protection, the resulting database must be considered to be a new, separate database, including for the purposes of Article 7(5)?=

The questions referred

Preliminary observations 23. Article 7(1) of the directive provides for specific protection, called a sui generis right, for the maker of a database within the meaning of Article 1(2) of the directive, provided that it >shows that there has been qualitatively and/or quantitatively a substantial investment in either the obtaining, verification or presentation of the contents=. 24. By its second and third questions, which should be considered together, the referring court seeks an interpretation of the concept of investment in the obtaining and verification of the contents of a database within the meaning of Article 7(1) of the directive. 25. Article 7(1) of the directive authorises a maker of a database protected by a sui generis right to prevent extraction and/or re-utilisation of the whole or of a substantial part of its contents. Article 7(5) also prohibits the repeated and systematic extraction and/or re-utilisation of insubstantial parts of the contents of the database implying acts which conflict with a normal exploitation of that database or which unreasonably prejudice the legitimate interests of the maker of the database. 26. The seventh, eighth and ninth questions referred, which should be considered together, concern the concepts of extraction and re-utilisation. The concepts of >substantial part= and >insubstantial part= of the contents of a database are crucial to the first, fourth, fifth and sixth questions, which will also be considered together. 27. The 10th question concerns the scope of the prohibition laid down by Article 7(5) of the directive. The 11th question seeks to ascertain whether a substantial change by the maker of the database to its contents implies the existence of a new database for the purposes of assessing, under Article 7(5) of the directive, whether acts of extraction and/or re-utilisation of insubstantial parts of the contents of the database were repeated and systematic.

The second and third questions, concerning the concept of investment in the obtaining or verification of the contents of a database within the meaning of Article 7(1) of the directive

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. . .29. Article 7(1) of the directive reserves the protection of the sui generis right to databases which meet a specific criterion, namely to those which show that there has been qualitatively and/or quantitatively a substantial investment in the obtaining, verification or presentation of their contents. 30. Under the 9th, 10th and 12th recitals of the preamble to the directive, its purpose, as William Hill points out, is to promote and protect investment in data >storage= and >processing= systems which contribute to the development of an information market against a background of exponential growth in the amount of information generated and processed annually in all sectors of activity. It follows that the expression >investment in Y the obtaining, verification or presentation of the contents= of a database must be understood, generally, to refer to investment in the creation of that database as such. 31. Against that background, the expression >investment in Y the obtaining Y of the contents= of a database must, as William Hill and the Belgian, German and Portuguese Governments point out, be understood to refer to the resources used to seek out existing independent materials and collect them in the database, and not to the resources used for the creation as such of independent materials. The purpose of the protection by the sui generis right provided for by the directive is to promote the establishment of storage and processing systems for existing information and not the creation of materials capable of being collected subsequently in a database. 32. That interpretation is backed up by the 39th recital of the preamble to the directive, according to which the aim of the sui generis right is to safeguard the results of the financial and professional investment made in >obtaining and collection of the contents= of a database. As the Advocate General notes in points 41 to 46 of her Opinion, despite slight variations in wording, all the language versions of the 39th recital support an interpretation which excludes the creation of the materials contained in a database from the definition of obtaining. 33. The 19th recital of the preamble to the directive, according to which the compilation of several recordings of musical performances on a CD does not represent a substantial enough investment to be eligible under the sui generis right, provides an additional argument in support of that interpretation. Indeed, it appears from that recital that the resources used for the creation as such of works or materials included in the database, in this case on a CD, cannot be deemed equivalent to investment in the obtaining of the contents of that database and cannot, therefore, be taken into account in assessing whether the investment in the creation of the database was substantial. 34. The expression >investment in Y the Y verification Y of the contents= of a database must be understood to refer to the resources used, with a view to ensuring the reliability of the information contained in that database, to monitor the accuracy of the materials collected when the database was created and during its operation. The resources used for verification during the stage of creation of data or other materials which are subsequently collected in a database, on the other hand, are resources used in creating a database and cannot therefore be taken into account in order to assess whether there was substantial investment in the terms of Article 7(1) of the directive. 35. In that light, the fact that the creation of a database is linked to the exercise of a principal activity in which the person creating the database is also the creator of

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the materials contained in the database does not, as such, preclude that person from claiming the protection of the sui generis right, provided that he establishes that the obtaining of those materials, their verification or their presentation, in the sense described in paragraphs 31 to 34 of this judgment, required substantial investment in quantitative or qualitative terms, which was independent of the resources used to create those materials. 36. Thus, although the search for data and the verification of their accuracy at the time a database is created do not require the maker of that database to use particular resources because the data are those he created and are available to him, the fact remains that the collection of those data, their systematic or methodical arrangement in the database, the organisation of their individual accessibility and the verification of their accuracy throughout the operation of the database may require substantial investment in quantitative and/or qualitative terms within the meaning of Article 7(1) of the directive. 37. In the case in the main proceedings, the referring court seeks to know whether the investments described in paragraph 14 of this judgment can be considered to amount to investment in obtaining the contents of the BHB database. The plaintiffs in the main proceedings stress, in that connection, the substantial nature of the above investment. 38. However, investment in the selection, for the purpose of organising horse racing, of the horses admitted to run in the race concerned relates to the creation of the data which make up the lists for those races which appear in the BHB database. It does not constitute investment in obtaining the contents of the database. It cannot, therefore, be taken into account in assessing whether the investment in the creation of the database was substantial. 39. Admittedly, the process of entering a horse on a list for a race requires a number of prior checks as to the identity of the person making the entry, the characteristics of the horse and the classification of the horse, its owner and the jockey. 40. However, such prior checks are made at the stage of creating the list for the race in question. They thus constitute investment in the creation of data and not in the verification of the contents of the database. 41. It follows that the resources used to draw up a list of horses in a race and to carry out checks in that connection do not represent investment in the obtaining and verification of the contents of the database in which that list appears. 42.In the light of the foregoing, the second and third questions referred should be answered as follows:

B The expression >investment in Y the obtaining Y of the contents= of a database in Article 7(1) of the directive must be understood to refer to the resources used to seek out existing independent materials and collect them in the database. It does not cover the resources used for the creation of materials which make up the contents of a database.

B The expression >investment in Y the Y verification Y of the contents= of a database in Article 7(1) of the directive must be understood to refer to the resources used, with a view to ensuring the reliability of the information contained in that database, to monitor the accuracy of the materials collected when the database was created and during its operation. The resources used for verification during the stage of creation of materials which are subsequently collected in a database do not fall within that definition.

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B The resources used to draw up a list of horses in a race and to carry out checks in that connection do not constitute investment in the obtaining and verification of the contents of the database in which that list appears.

The seventh, eighth and ninth questions, on the terms >extraction= and >re-utilisation= in Article 7 of the directive

43. By its seventh, eighth and ninth questions, the referring court seeks essentially to know whether use such as that made by William Hill of a database constitutes extraction and/or re-utilisation within the meaning of Article 7 of the directive. The referring court asks, inter alia, whether the protection conferred by the sui generis right also covers the use of data which, although derived originally from a protected database, were obtained by the user from sources other than that database. 44. The protection of the sui generis right provided for by Article 7(1) of the directive gives the maker of a database the option of preventing the unauthorised extraction and/or re-utilisation of all or a substantial part of the contents of that database, according to the 41st recital of the preamble to the directive. Furthermore, Article 7(5) of the directive prohibits, under certain conditions, the unauthorised extraction and/or re-utilisation of insubstantial parts of the contents of a database. 45. The terms extraction and re-utilisation must be interpreted in the light of the objective pursued by the sui generis right. It is intended to protect the maker of the database against >acts by the user which go beyond [the] legitimate rights and thereby harm the investment= of the maker, as indicated in the 42nd recital of the preamble to the directive. 46. According to the 48th recital of the preamble to the directive, the sui generis right has an economic justification, which is to afford protection to the maker of the database and guarantee a return on his investment in the creation and maintenance of the database. 47. Accordingly, it is not relevant, in an assessment of the scope of the protection of the sui generis right, that the act of extraction and/or re-utilisation is for the purpose of creating another database, whether in competition with the original database or not, and whether the same or a different size from the original, nor is it relevant that the act is part of an activity other than the creation of a database. The 42nd recital of the preamble to the directive confirms, in that connection, that >the right to prohibit extraction and/or re-utilisation of all or a substantial part of the contents relates not only to the manufacture of a parasitical competing product but also to any user who, through his acts, causes significant detriment, evaluated qualitatively or quantitatively, to the investment=. 48. It must also be pointed out that, although the Proposal for a Council Directive on the legal protection of databases (OJ 1992 C 156, p. 4), presented by the Commission on 15 April 1992, restricted the scope of the protection conferred by the sui generis right, under Article 2(5), to unauthorised extraction or re-utilisation >for commercial purposes=, the absence of any reference in Article 7 of the directive to such purposes indicates that it is irrelevant, in an assessment of the lawfulness of an act under the directive, whether the act is for a commercial or a non-commercial purpose. 49. In Article 7(2)(a) of the directive, extraction is defined as >the permanent or temporary transfer of all or a substantial part of the contents of a database to another medium by any means or in any form=, while in Article 7(2)(b), re-

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utilisation is defined as >any form of making available to the public all or a substantial part of the contents of a database by the distribution of copies, by renting, by on-line or other forms of transmission=. 50. The reference to >a substantial part= in the definition of the concepts of extraction and re-utilisation gives rise to confusion given that, according to Article 7(5) of the directive, extraction or re-utilisation may also concern an insubstantial part of a database. As the Advocate General observes, in point 90 of her Opinion, the reference, in Article 7(2) of the directive, to the substantial nature of the extracted or re-utilised part does not concern the definition of those concepts as such but must be understood to refer to one of the conditions for the application of the sui generis right laid down by Article 7(1) of the directive. 51. The use of expressions such as >by any means or in any form= and >any form of making available to the public= indicates that the Community legislature intended to give the concepts of extraction and re-utilisation a wide definition. In the light of the objective pursued by the directive, those terms must therefore be interpreted as referring to any act of appropriating and making available to the public, without the consent of the maker of the database, the results of his investment, thus depriving him of revenue which should have enabled him to redeem the cost of the investment. 52. Against that background, and contrary to the argument put forward by William Hill and the Belgian and Portuguese Governments, the concepts of extraction and re-utilisation cannot be exhaustively defined as instances of extraction and re-utilisation directly from the original database at the risk of leaving the maker of the database without protection from unauthorised copying from a copy of the database. That interpretation is confirmed by Article 7(2)(b) of the directive, according to which the first sale of a copy of a database within the Community by the rightholder or with his consent is to exhaust the right to control >resale=, but not the right to control extraction and re-utilisation of the contents, of that copy within the Community. 53. Since acts of unauthorised extraction and/or re-utilisation by a third party from a source other than the database concerned are liable, just as much as such acts carried out directly from that database are, to prejudice the investment of the maker of the database, it must be held that the concepts of extraction and re-utilisation do not imply direct access to the database concerned. 54. However, it must be stressed that the protection of the sui generis right concerns only acts of extraction and re-utilisation as defined in Article 7(2) of the directive. That protection does not, on the other hand, cover consultation of a database. 55. Of course, the maker of a database can reserve exclusive access to his database to himself or reserve access to specific people. However, if he himself makes the contents of his database or a part of it accessible to the public, his sui generis right does not allow him to prevent third parties from consulting that base. 56. The same applies where the maker of the database authorises a third party to re-utilise the contents of his database, in other words, to distribute it to the public. According to the definition of re-utilisation in Article 7(2)(b) of the directive, read in conjunction with the 41st recital of the preamble thereto, the authorisation of the maker for the re-utilisation of the database or a substantial part of it implies that he consents to his database or the relevant part of it being made accessible to the public by the third party to whom he gave that authorisation. In authorising re-

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utilisation, the maker of the database thus creates an alternative means of access to the contents of and of consultation of his database for those interested. 57. The fact that a database can be consulted by third parties through someone who has authorisation for re-utilisation from the maker of the database does not, however, prevent the maker from recovering the costs of his investment. It is legitimate for the maker to charge a fee for the re-utilisation of the whole or a part of his database which reflects, inter alia, the prospect of subsequent consultation and thus guarantees him a sufficient return on his investment. 58. On the other hand, a lawful user of a database, in other words, a user whose access to the contents of a database for the purpose of consultation results from the direct or indirect consent of the maker of the database, may be prevented by the maker, under the sui generis right provided for by Article 7(1) of the directive, from then carrying out acts of extraction and/or re-utilisation of the whole or a substantial part of the database. The consent of the maker of the database to consultation does not entail exhaustion of the sui generis right. 59. That analysis is confirmed, as regards extraction, by the 44th recital of the preamble to the directive, according to which, >when on-screen display of the contents of a database necessitates the permanent or temporary transfer of all or a substantial part of such contents to another medium, that act should be subject to authorisation by the rightholder=. Similarly, as regards re-utilisation, the 43rd recital of the preamble to the directive states that >in the case of on-line transmission, the right to prohibit re-utilisation is not exhausted either as regards the database or as regards a material copy of the database or of part thereof made by the addressee of the transmission with the consent of the rightholder=. 60. It should, however, be emphasised that the prohibition in Article 7(1) of the directive concerns only extraction and/or re-utilisation of the whole or of a substantial part of a database whose creation required a substantial investment. According to Article 8(1) of the directive, apart from in the cases referred to in Article 7(5) of the directive, the sui generis right does not prevent a lawful user from extracting and re-utilising insubstantial parts of the contents of a database. 61. It follows from the foregoing that acts of extraction, in other words, the transfer of the contents of the database to another medium, and acts of re-utilisation, in other words, the making available to the public of the contents of a database, which affect the whole or a substantial part of the contents of a database require the authorisation of the maker of the database, even where he has made his database, as a whole or in part, accessible to the public or authorised a specific third party or specific third parties to distribute it to the public. 62. The directive contains an exception to the principle set out in the previous paragraph. Article 9 defines exhaustively three cases in which Member States may stipulate that lawful users of a database which is made available to the public in whatever manner may, without the authorisation of its maker, extract or re-utilise a >substantial part= of the contents of that database. Those cases are: extraction for private purposes of the contents of a non-electronic database, extraction for the purposes of illustration for teaching or scientific research and extraction and/or re-utilisation for the purposes of public security or an administrative or judicial procedure. 63. In the case in the main proceedings, the order for reference states that the data concerning horse races which William Hill displays on its internet site and which originate in the BHB database are obtained, first, from newspapers published the day before the race and, second, from the RDF supplied by SIS.

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64. According to the order for reference, the information published in the newspapers is supplied to the press directly by Weatherbys Group Ltd, the company which maintains the BHB database. As regards William Hill=s other source of information, it must be borne in mind that SIS is authorised by Racing Pages Ltd, which is partly controlled by Weatherbys Group Ltd, to supply information concerning horse races in the form of RDF to its own members, which include William Hill. The data in the BHB database concerning horse races have thus been made accessible to the public for the purpose of consultation with the authorisation of BHB. 65. Although William Hill is a lawful user of the database made accessible to the public, at least as regards the part of that database representing information about races, it appears from the order for reference that it carries out acts of extraction and re-utilisation within the meaning of Article 7(2) of the directive. First, it extracts data originating in the BHB database by transferring them from one medium to another. It integrates those data into its own electronic system. Second, it re-utilises those data by then making them available to the public on its internet site in order to allow its clients to bet on horse races. 66. According to the order for reference, that extraction and re-utilisation was carried out without the authorisation of BHB and Others. Since the present case does not fall within any of the cases described in Article 9 of the directive, acts such as those carried out by William Hill could be prevented by BHB and Others under their sui generis right provided that they affect the whole or a substantial part of the contents of the BHB database within the meaning of Article 7(1) of the directive. If such acts affected insubstantial parts of the database they would be prohibited only if the conditions in Article 7(5) of the directive were fulfilled. 67. In the light of the foregoing, the seventh, eighth and ninth questions should be answered as follows:

B The terms >extraction= and >re-utilisation= in Article 7 of the directive must be interpreted as referring to any unauthorised act of appropriation and distribution to the public of the whole or a part of the contents of a database. Those terms do not imply direct access to the database concerned.

B The fact that the contents of a database were made accessible to the public by its maker or with his consent does not affect the right of the maker to prevent acts of extraction and/or re-utilisation of the whole or a substantial part of the contents of a database.

The first, fourth, fifth and sixth questions, concerning the terms >substantial part= and >insubstantial part= of the contents of a database in Article 7 of the directive

68. By its fourth, fifth and sixth questions, the referring court raises the question of the meaning of the terms >substantial part= and >insubstantial part= of the contents of a database as used in Article 7 of the directive. By its first question it also seeks to know whether materials derived from a database do not constitute a part, substantial or otherwise, of that database, where their systematic or methodical arrangement and the conditions of their individual accessibility have been altered by the person carrying out the extraction and/or re-utilisation. 69. In that connection, it must be borne in mind that protection by the sui generis right covers databases whose creation required a substantial investment. Against that background, Article 7(1) of the directive prohibits extraction and/or re-utilisation not only of the whole of a database protected by the sui generis right but

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also of a substantial part, evaluated qualitatively or quantitatively, of its contents. According to the 42nd recital of the preamble to the directive, that provision is intended to prevent a situation in which a user >through his acts, causes significant detriment, evaluated qualitatively or quantitatively, to the investment=. It appears from that recital that the assessment, in qualitative terms, of whether the part at issue is substantial, must, like the assessment in quantitative terms, refer to the investment in the creation of the database and the prejudice caused to that investment by the act of extracting or re-utilising that part. 70. The expression >substantial part, evaluated quantitatively=, of the contents of a database within the meaning of Article 7(1) of the directive refers to the volume of data extracted from the database and/or re-utilised, and must be assessed in relation to the volume of the contents of the whole of that database. If a user extracts and/or re-utilises a quantitatively significant part of the contents of a database whose creation required the deployment of substantial resources, the investment in the extracted or re-utilised part is, proportionately, equally substantial. 71. The expression >substantial part, evaluated qualitatively=, of the contents of a database refers to the scale of the investment in the obtaining, verification or presentation of the contents of the subject of the act of extraction and/or re-utilisation, regardless of whether that subject represents a quantitatively substantial part of the general contents of the protected database. A quantitatively negligible part of the contents of a database may in fact represent, in terms of obtaining, verification or presentation, significant human, technical or financial investment. 72. It must be added that, as the existence of the sui generis right does not, according to the 46th recital of the preamble to the directive, give rise to the creation of a new right in the works, data or materials themselves, the intrinsic value of the materials affected by the act of extraction and/or re-utilisation does not constitute a relevant criterion for the assessment of whether the part at issue is substantial. 73. It must be held that any part which does not fulfil the definition of a substantial part, evaluated both quantitatively and qualitatively, falls within the definition of an insubstantial part of the contents of a database. 74. In that regard, it appears from the order for reference that the materials displayed on William Hill=s internet sites, which derive from the BHB database, represent only a very small proportion of the whole of that database, as stated in paragraph 19 of this judgment. It must therefore be held that those materials do not constitute a substantial part, evaluated quantitatively, of the contents of that database. 75. According to the order for reference, the information published by William Hill concerns only the following aspects of the BHB database: the names of all the horses running in the race concerned, the date, the time and/or the name of the race and the name of the racecourse, as also stated in paragraph 19 of this judgment. 76. In order to assess whether those materials represent a substantial part, evaluated qualitatively, of the contents of the BHB database, it must be considered whether the human, technical and financial efforts put in by the maker of the database in obtaining, verifying and presenting those data constitute a substantial investment. 77. BHB and Others submit, in that connection, that the data extracted and re-utilised by William Hill are of crucial importance because, without lists of runners,

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the horse races could not take place. They add that those data represent a significant investment, as demonstrated by the role played by a call centre employing more than 30 operators. 78. However, it must be observed, first, that the intrinsic value of the data affected by the act of extraction and/or re-utilisation does not constitute a relevant criterion for assessing whether the part in question is substantial, evaluated qualitatively. The fact that the data extracted and re-utilised by William Hill are vital to the organisation of the horse races which BHB and Others are responsible for organising is thus irrelevant to the assessment whether the acts of William Hill concern a substantial part of the contents of the BHB database. 79. Next, it must be observed that the resources used for the creation as such of the materials included in a database cannot be taken into account in assessing whether the investment in the creation of that database was substantial, as stated in paragraphs 31 to 33 of this judgment. 80. The resources deployed by BHB to establish, for the purposes of organising horse races, the date, the time, the place and/or name of the race, and the horses running in it, represent an investment in the creation of materials contained in the BHB database. Consequently, and if, as the order for reference appears to indicate, the materials extracted and re-utilised by William Hill did not require BHB and Others to put in investment independent of the resources required for their creation, it must be held that those materials do not represent a substantial part, in qualitative terms, of the BHB database. 81. That being so, there is thus no need to reply to the first question referred. The change made by the person making the extraction and re-utilisation to the arrangement or the conditions of individual accessibility of the data affected by that act cannot, in any event, have the effect of transforming a part of the contents of the database at issue which is not substantial into a substantial part. 82. In the light of the foregoing, the fourth, fifth and sixth questions referred should be answered as follows:

B The expression >substantial part, evaluated Y quantitatively, of the contents of [a] database= in Article 7 of the directive refers to the volume of data extracted from the database and/or re-utilised and must be assessed in relation to the total volume of the contents of the database.

B The expression >substantial part, evaluated qualitatively Y of the contents of [a] database= refers to the scale of the investment in the obtaining, verification or presentation of the contents of the subject of the act of extraction and/or re-utilisation, regardless of whether that subject represents a quantitatively substantial part of the general contents of the protected database.

B Any part which does not fulfil the definition of a substantial part, evaluated both quantitatively and qualitatively, falls within the definition of an insubstantial part of the contents of a database.

The 10th question, concerning the scope of the prohibition laid down by Article 7(5) of the directive

83. By its 10th question, the referring court seeks to know what type of act is covered by the prohibition laid down by Article 7(5) of the directive. It also seeks to know whether acts such as those carried out by William Hill are covered by that prohibition.

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84. On that point, it appears from Article 8(1) and from the 42nd recital of the preamble to the directive that, as a rule, the maker of a database cannot prevent a lawful user of that database from carrying out acts of extraction and re-utilisation of an insubstantial part of its contents. Article 7(5) of the directive, which authorises the maker of the database to prevent such acts under certain conditions, thus provides for an exception to that general rule. 85. Common Position (EC) No 20/95 adopted by the Council on 10 July 1995 (OJ 1995 C 288, p. 14) states, under point 14 of the Council=s statement of reasons: >to ensure that the lack of protection of the insubstantial parts does not lead to their being repeatedly and systematically extracted and/or re-utilised, paragraph 5 of this article in the common position introduces a safeguard clause=. 86. It follows that the purpose of Article 7(5) of the directive is to prevent circumvention of the prohibition in Article 7(1) of the directive. Its objective is to prevent repeated and systematic extractions and/or re-utilisations of insubstantial parts of the contents of a database, the cumulative effect of which would be to seriously prejudice the investment made by the maker of the database just as the extractions and/or re-utilisations referred to in Article 7(1) of the directive would. 87. The provision therefore prohibits acts of extraction made by users of the database which, because of their repeated and systematic character, would lead to the reconstitution of the database as a whole or, at the very least, of a substantial part of it, without the authorisation of the maker of the database, whether those acts were carried out with a view to the creation of another database or in the exercise of an activity other than the creation of a database. 88. Similarly, Article 7(5) of the directive prohibits third parties from circumventing the prohibition on re-utilisation laid down by Article 7(1) of the directive by making insubstantial parts of the contents of the database available to the public in a systematic and repeated manner. 89. Under those circumstances, >acts which conflict with a normal exploitation of [a] database or which unreasonably prejudice the legitimate interests of the maker of the database= refer to unauthorised actions for the purpose of reconstituting, through the cumulative effect of acts of extraction, the whole or a substantial part of the contents of a database protected by the sui generis right and/or of making available to the public, through the cumulative effect of acts of re-utilisation, the whole or a substantial part of the contents of such a database, which thus seriously prejudice the investment made by the maker of the database. 90. In the case in the main proceedings, it is clear, in the light of the information given in the order for reference, that the acts of extraction and re-utilisation carried out by William Hill concern insubstantial parts of the BHB database, as stated in paragraphs 74 to 80 of this judgment. According to the order for reference, they are carried out on the occasion of each race held. They are thus of a repeated and systematic nature. 91. However, such acts are not intended to circumvent the prohibition laid down in Article 7(1) of the directive. There is no possibility that, through the cumulative effect of its acts, William Hill might reconstitute and make available to the public the whole or a substantial part of the contents of the BHB database and thereby seriously prejudice the investment made by BHB in the creation of that database. 92. It must be pointed out in that connection that, according to the order for reference, the materials derived from the BHB database which are published daily on William Hill=s internet sites concern only the races for that day and are limited to the information mentioned in paragraph 19 of this judgment.

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93.As explained in paragraph 80 of this judgment, it appears from the order for reference that the presence, in the database of the claimants, of the materials affected by William Hill=s actions did not require investment by BHB and Others independent of the resources used for their creation. 94. It must therefore be held that the prohibition in Article 7(5) of the directive does not cover acts such as those of William Hill. 95. In the light of the foregoing, the answer to the 10th question must be that the prohibition laid down by Article 7(5) of the directive refers to unauthorised acts of extraction or re-utilisation the cumulative effect of which is to reconstitute and/or make available to the public, without the authorisation of the maker of the database, the whole or a substantial part of the contents of that database and thereby seriously prejudice the investment by the maker. 96. Against that background, it is not necessary to reply to the 11th question referred.

Facebook, Inc. v. Power Ventures, Inc., et al.Case5:08-cv-05780-JW Document89

I. INTRODUCTION

Facebook, Inc. (“Plaintiff” or “Facebook”) brings this action against Power Ventures, Inc. (“Defendant” or “Power”) alleging, inter alia, violations of the California Comprehensive Computer Data Access and Fraud Act, Cal. Penal Code § 502 (“Section 502”). Facebook alleges that Power accessed the Facebook website in violation of Facebook’s Terms of Use, and when Facebook tried to stop Power’s unauthorized access, Power circumvented Facebook’s technical barriers. Power brings counterclaims against Facebook alleging, inter alia, violations of the Sherman Act, 15 U.S.C. § 2.

Presently before the Court are Facebook’s Motion for Judgment on the Pleadings Pursuant to Fed. R. Civ. P. 12(c) or, in the Alternative, Partial Summary Judgment of Liability Under California Penal Code § 502;1 Defendants’ Motion for Summary Judgment;2 and Facebook’s Motion to Dismiss Counterclaims and Strike Affirmative Defenses.3 The Court conducted a hearing on June 7, 2010. Based on the papers submitted to date and oral argument, the Court DENIES Facebook’s Motion for Judgment on the Pleadings, DENIES the parties’ Cross-Motions for Summary Judgment, GRANTS Facebook’s Motion to Dismiss Defendants’ counterclaims for violations of Section 2 of the Sherman Act, GRANTS Facebook’s Motion to Dismiss Defendants’ UCL counterclaim, and DENIES Facebook’s Motion to Strike Defendants’ Affirmative Defenses.

. . .

IV. DISCUSSION . . .

B. Defendants’ Section 502 Liability

Facebook contends that the undisputed facts prove that Defendants violated Section 502. (Facebook’s Motion for Judgment on the Pleadings at 1.) Facebook

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bases its Section 502 claim solely on facts that Defendants admit in their Amended Answer, which Facebook contends show beyond dispute that Power accessed the Facebook website in violation of the Facebook terms of use, and that when Facebook tried to stop Power, Power worked around Facebook’s technical barriers. (Id.) Defendants respond, inter alia, that there is no evidence that Power ever accessed the Facebook website without the express permission of the user and rightful owner of the accessed data.

On May 5, 2010, the Court granted the Electronic Frontier Foundation’s (“EFF”) Motion to File Amicus Curiae in support of Defendants’ Motion. EFF contends that in order to avoid constitutional vagueness concerns, the Court must construe the statutory phrase “without permission” narrowly to exclude access to a website or computer network that merely violates a term of use. Allowing criminal liability based only on violation of contractual terms of service, EFF contends, would grant the website or network administrator essentially unlimited authority to define the scope of criminality and potentially expose millions of average internet users to criminal sanctions without any meaningful notice. (Id.)

The Court finds that all of the subsections of Section 502(c) that potentially apply in this case require that the defendant’s actions be taken “without permission.” See Cal. Penal Code § 502(c)(2), (3), (7). However, the statute does not expressly define the term “without permission.” In interpreting any statutory language, the court looks first to the words of the statute. Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004). If the language is unambiguous, the statute should be interpreted according to the plain meaning of the text. Id. at 534. The structure and purpose of a statute can provide guidance in determining the plain meaning of its provisions. K-Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988). Statutory language is ambiguous if it is capable of being understood in two or more possible senses or ways. Chickasaw Nation v. United States, 534 U.S. 84, 90 (2001). If a statutory provision is ambiguous, the court turns to the legislative history for guidance. SEC v. McCarthy, 322 F.3d 650, 655 (9th Cir. 2003). Here, the Court first looks to the plain language of the statute. However, the term “without permission” can be understood in multiple ways, especially with regard to whether access is without permission simply as a result of violating the terms of use. Thus, the Court must consider legislative intent and constitutional concerns to determine whether the conduct at issue here falls within the scope of the statute. See F.C.C. v. Fox Television Stations, Inc., 129 S. Ct. 1800, 1811 (2009) (noting that “the canon of constitutional avoidance in an interpretive tool, counseling that ambiguous statutory language be construed to avoid serious constitutional doubts”).

1. Plain Language of the Statute

Here, Facebook does not allege that Power has altered, deleted, damaged, or destroyed any data, computer, computer system, or computer network, so the subsections that require that type of action are not applicable. However, the Court finds that the following subsections of Section 502 do not require destruction of data, and thus may apply here:

(1) Section 502(c)(2) holds liable any person who “[k]nowingly accesses and without permission takes, copies, or makes use of any data from a computer, computer system, or computer network, or takes or copies any supporting documentation,

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whether existing or residing internal or external to a computer, computer system, or computer network;”

(2) Section 502(c)(3) holds liable any person who “[k]nowingly and without permission uses or causes to be used computer services;” and

(3) Section 502(c)(7) holds liable any person who “[k]nowingly and without permission accesses or causes to be accessed any computer, computer system, or computer network.”

To support its claim that Defendants violated these provisions, Facebook relies solely on facts that Defendants admitted in their Amended Answer. Specifically, Facebook points to Defendants’ admissions that: (1) “Power permits users to enter their account information to access automated devices and programs to access and obtain information from the Facebook website the Facebook site through Power.com;” (2) “Defendants developed computer software and other aggregating services;” (3) Facebook communicated to Vachani its claims that “Power.com’s access of Facebook’s website and servers was unauthorized and violated Facebook’s rights, including Facebook’s trademark, copyrights, and business expectations with its users;” (4) “Facebook implemented technical measures to block users from accessing Facebook through Power.com;”17 and (5) “Power provided users with tools necessary to access Facebook through Power.com.”18 Since all three of the subsections at issue here require that Defendants’ acts with respect to the computer or computer network be taken without permission, the Court analyzes that requirement first. Defendants and EFF contend that Power’s actions could not have been without permission because Power only accessed the Facebook website with the permission of a Facebook account holder and at that account holder’s behest. (See Defendants’ Opposition re Summary Judgment at 11; Amicus Brief at 11.) Facebook, on the other hand, contends that regardless of whatever permission an individual Facebook user may have given to Power to access a particular Facebook account, Power’s actions clearly violated the website’s terms of use, which state that a Facebook user may not “collect users’ content or information, or otherwise access Facebook, using automated means (such as harvesting bots, robots, spiders, or scrapers) without [Facebook’s] permission.” Since Power admits that it utilized “automated devices” to gain access to the Facebook website, the Court finds that it is beyond dispute that Power’s activities violated an express term of the Facebook terms of use.20 The issue then becomes whether an access or use that involves a violation of the terms of use is “without permission” within the meaning of the statute. In the modern context, in which millions of average internet users access websites every day without ever reading, much less understanding, those websites’ terms of use, this is far from an easy or straightforward question. Without clear guidance from the statutory language itself, the Court turns to case law, legislative intent, and the canon of constitutional avoidance to assist in interpreting the statute, and then analyzes whether the acts at issue here were indeed taken without permission.

2. Caselaw

Since the California Supreme Court has not directly addressed the question of whether the violation of a term of use constitutes access or use without permission pursuant to Section 502, the Court looks to analogous state appellate court cases

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and federal court cases from this district for guidance as to the statute’s proper construction. The Court also considers cases interpreting the Computer Fraud and Abuse Act (“CFAA”), the federal corollary to Section 502, in evaluating how broad an application Section 502 should properly be given.

EFF relies on two state appellate cases for the proposition that Section 502 should not apply to persons who have permission to access a computer or computer system, but who use that access in a manner that violates the rules applicable to that system. Chrisman v. City of Los Angeles, 155 Cal. App. 4th 29, 32 (Cal. Ct. App. 2007); Mahru v. Superior Court, 191 Cal. App. 3d 545, 549 (Cal. Ct. App. 1987). In Chrisman, the court found that a police officer did not violate Section 502 when, while on duty, the officer “accessed the Department computer system [] for non-duty-related activities.” 155 Cal. App. 4th at 32. The court found that at essence, Section 502 is an anti-hacking statute, and “[o]ne cannot reasonably describe appellant’s improper computer inquiries about celebrities, friends, and others as hacking.” Id. at 35. The officer’s “computer queries seeking information that the department’s computer system was designed to provide to officers was misconduct if he had no legitimate purpose for that information, but it was not hacking the computer’s ‘logical, arithmetical, or memory function resources,’ as [the officer] was entitled to access those resources.” Id. While Chrisman does not address the specific issue before the Court here, and focuses on the statutory definition of “access” rather than “without permission,” the Court finds that the case helps to clarify that using a computer network for the purpose that it was designed to serve, even if in a manner that is otherwise improper, is not the kind of behavior that the legislature sought to prohibit when it enacted Section 502.

In Mahru, the court found that the director and part owner of a data-processing firm was not liable under Section 502 when he instructed the company’s chief computer operator to make specified changes in the names of two files in a former customer’s computer program in retaliation for that customer terminating its contract with the company. 191 Cal. App. 3d at 547-48. These changes had the effect of preventing the former customer’s employees from being able to run their computer programs without the assistance of an expert computer software technician. Id. In finding that Section 502 had not been violated by the company’s actions, the court stated:

The Legislature could not have meant, by enacting section 502, to bring the Penal Code into the computer age by making annoying or spiteful acts criminal offenses whenever a computer is used to accomplish them. Individuals and organizations use computers for typing and other routine tasks in the conduct of their affairs, and sometimes in the course of these affairs they do vexing, annoying, and injurious things. Such acts cannot all be criminal. Id. at 549.

However, the court in Mahru based its finding of no liability in part on documentary evidence establishing that the company, and not the former customer, owned the computer hardware and software, which explains why the company’s manipulation of files stored on that computer hardware was merely vexatious and not unlawful hacking. The Court finds that Mahru is not applicable to the circumstances here, where it is undisputed that Power accessed data stored on Facebook’s server.

In support of its contention that Facebook users cannot authorize Power to access Facebook’s computer systems, Facebook relies on a previous order in this case and another case from this District. On May 11, 2009, Judge Fogel issued an order denying Defendants’ Motion to Dismiss Plaintiff’s copyright infringement,

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DMCA, and trademark infringement claims. In addressing Plaintiff’s copyright infringement claim, Judge Fogel found that, “[v]iewing the allegations in the FAC as true, the utilization of Power.com by Facebook users exceeds their access rights pursuant to the Terms of Use. Moreover, when a Facebook user directs Power.com to access the Facebook website, an unauthorized copy of the user’s profile page is created.” (May 11 Order at 6-7.) The Court finds that whether or not Facebook users’ utilization of Power.com exceeds their access rights under Facebook’s terms of use is not the issue presented in these Motions. Instead, the Court must determine whether such a violation of the terms of use constitutes use “without permission” within the meaning of Section 502, a question that the May 11 Order did not directly address.

Finally, in Facebook, Inc. v. ConnectU LLC, Judge Seeborg found that a competing social networking site violated Section 502 when it accessed the Facebook website to collect “millions” of email addresses of Facebook users, and then used those email addresses to solicit business for itself. 489 F. Supp. 2d 1087, 1089 (N.D. Cal. 2007). In that case, Judge Seeborg found unavailing ConnectU’s contention that it did not act without permission because it only “accessed information on the Facebook website that ordinarily would be accessible only to registered users by using log-in information voluntarily supplied by registered users.” Id. at 1090-91. Judge Seeborg found that ConnectU was subject to Facebook’s terms of use and rejected ConnectU’s contention that “a private party cannot define what is or what is not a criminal offense by unilateral imposition of terms and conditions of use.” Id. at 1091. The court held that “[t]he fact that private parties are free to set the conditions on which they will grant such permission does not mean that private parties are defining what is criminal and what is not.” Id.

The Court finds that of the cases discussed so far, the holding in ConnectU is most applicable to the present case. However, the Court respectfully disagrees with ConnectU in one key respect. Contrary to the holding of ConnectU, the Court finds that allowing violations of terms of use to fall within the ambit of the statutory term “without permission” does essentially place in private hands unbridled discretion to determine the scope of criminal liability recognized under the statute. If the issue of permission to access or use a website depends on adhering to unilaterally imposed contractual terms, the website or computer system administrator has the power to determine which actions may expose a user to criminal liability. This raises constitutional concerns that will be addressed below.

Although cases interpreting the scope of liability under the CFAA do not govern the Court’s analysis of the scope of liability under Section 502, CFAA cases can be instructive. EFF points to several CFAA cases for the proposition that the CFAA prohibits trespass and theft, not mere violations of terms of use. See, e.g., LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1130 (9th Cir. 2009) (“[F]or purposes of the CFAA, when an employer authorizes an employee to use a company computer subject to certain limitations, the employee remains authorized to use the computer even if the employee violates those limitations.”); Diamond Power Int’l, Inc. v. Davidson, 540 F. Supp. 2d 1322 (N.D. Ga. 2007) (“Under the more reasoned view, a violation for accessing ‘without authorization’ occurs only where initial access is not permitted.”); But see Shurgard Storage Ctrs., Inc. v. Safeguard Self Storage, Inc., 119 F. Supp. 2d 1121, 1125-29 (W.D. Wash. 2000) (finding employee may be held liable under CFAA for taking employer information from the company’s computer system to his next job on the ground that he was “without authorization”

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when he “allegedly sent [the employer’s] proprietary information to the defendant”).

While there appears to be some disagreement in the district courts as to the scope of the term “without authorization” in the CFAA context, the Court finds the Ninth Circuit’s opinion in LVRC Holdings to be particularly useful in construing the analogous term in Section 502. In that case, the Ninth Circuit found that access to a computer may be “authorized,” within the statutory meaning of the term, even if that access violates an agreed upon term of using that computer. In general, the Court finds that the more recent CFAA cases militate for an interpretation of Section 502 that does not premise permission to access or use a computer or computer network on a violation of terms of use. However, since none of the cases discussed provides a definitive definition of without permission under Section 502, the Court now looks to the legislative purpose of the statute to the extent that it can be discerned. 15

3. Legislative Purpose

Section 502 includes the following statement of statutory purpose:

It is the intent of the Legislature in enacting this section to expand the degree of protection afforded to individuals, businesses, and governmental agencies from tampering, interference, damage, and unauthorized access to lawfully created computer data and computer systems. The Legislature finds and declares that the proliferation of computer technology has resulted in a concomitant proliferation of computer crime and other forms of unauthorized access to computers, computer systems, and computer data.

The Legislature further finds that protection of the integrity of all types and forms of lawfully created computers, computer systems, and computer data is vital to the protection of the privacy of individuals as well as to the well-being of financial institutions, business concerns, governmental agencies, and others within this state that lawfully utilize those computers, computer systems, and data.

Cal. Penal Code § 502(a).

Facebook contends that this language evidences legislative intent to address conduct beyond “straightforward hacking and tampering.” (Facebook’s Reply re Summary Judgment at 2.) Specifically, Facebook contends that the legislature’s use of the phrases “protection . . . from . . . 13 unauthorized access” and “protection of the integrity of all types and forms of computers, computer systems, and computer data” demonstrates a far-reaching legislative purpose to protect the entire 15 commercial computer infrastructure from trespass. (Id. at 2-3.)

The Court declines to give the statute’s statement of legislative intent the sweeping meaning that Facebook ascribes to it. Section 502(a) speaks in general terms of a “proliferation of computer crime and other forms of unauthorized access to computers,” but does not offer any further guidance as to what specific acts would constitute such crime or unauthorized access. It is far from clear what conduct the legislature believed posed a threat to the integrity of computers and

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computer systems, or if the legislature could even fathom the shape that those threats would take more than twenty years after the statute was first enacted.

Thus, the Court does not assign any weight to the statute’s statement of legislative intent in construing the liability provisions of Section 502.

4. Rule of Lenity

EFF contends that interpreting Section 502 broadly to allow liability where the absence of permission is based only on the violation of a contractual term of use or failure to fully comply with a cease and desist letter would render the statute unconstitutionally vague, stripping the statute of adequate notice to citizens of what conduct is criminally prohibited. (Amicus Brief at 24-28.) EFF further contends that giving the statute the broad application that Facebook seeks could expose large numbers of average internet users to criminal liability for engaging in routine web-surfing and emailing activity. (Id.)

“It is a fundamental tenet of due process that ‘[n]o one may be required at peril of life, liberty or property to speculate as to the meaning of penal statutes.” Lanzetta v. New Jersey, 306 U.S. 451, 453 (1993). Thus, a criminal statute is invalid if it “fails to give a person of ordinary intelligence fair notice that his contemplated conduct is forbidden.” United States v. Harriss, 347 U.S. 612 (1954). Where a statute has both criminal and noncriminal applications, courts must interpret the statute consistently in both contexts. Leocal v. Ashcroft, 543 U.S. 1, 11 n.8 (2004). In the Ninth Circuit, “[t]o survive vagueness review, a statute must ‘(1) define the offense with sufficient definiteness that ordinary people can understand what conduct is prohibited; and (2) establish standards to permit police to enforce the law in a non-arbitrary, non-discriminatory manner.’” United States v. Sutcliffe, 505 F.3d 944, 953 (9th Cir. 2007).

The Court finds that interpreting the statutory phrase “without permission” in a manner that imposes liability for a violation of a term of use or receipt of a cease and desist letter would create a constitutionally untenable situation in which criminal penalties could be meted out on the basis of violating vague or ambiguous terms of use. In the words of one commentator, “By granting the computer owner essentially unlimited authority to define authorization, the contract standard delegates the scope of criminality to every computer owner.” Users of computer and internet services cannot have adequate notice of what actions will or will not expose them to criminal liability when a computer network or website administrator can unilaterally change the rules at any time and are under no obligation to make the terms of use specific or understandable to the general public. Thus, in order to avoid rendering the statute constitutionally infirm, the Court finds that a user of internet services does not access or use a computer, computer network, or website without permission simply because that user violated a contractual term of use.22

If a violation of a term of use is by itself insufficient to support a finding that the user’s access was “without permission” in violation of Section 502, the issue becomes what type of action would be sufficient to support such a finding. The Court finds that a distinction can be made between access that violates a term of use and access that circumvents technical or code-based barriers that a computer network or website administrator erects to restrict the user’s privileges within the system, or to bar the user from the system altogether. Limiting criminal liability to circumstances in which a user gains access to a computer, computer network, or

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website to which access was restricted through technological means eliminates any constitutional notice concerns, since a person applying the technical skill necessary to overcome such a barrier will almost always understand that any access gained through such action is unauthorized. Thus, the Court finds that accessing or using a computer, computer network, or website in a manner that overcomes technical or code-based barriers is “without permission,” and may subject a user to liability under Section 502.

Applying this construction of the statute here, the Court finds that Power did not act “without permission” within the meaning of Section 502 when Facebook account holders utilized the Power website to access and manipulate their user content on the Facebook website, even if such action violated Facebook’s Terms of Use. However, to the extent that Facebook can prove that in doing so, Power circumvented Facebook’s technical barriers, Power may be held liable for violation of Section 502. Here, Facebook relies solely on the pleadings for its Motion. In their Answer, Defendants do not directly admit that the tools Power provided to its users were designed to circumvent the technical barriers that Facebook put in place to block Power’s access to the Facebook website. Thus, the Court finds that there is a genuine issue of material fact as to whether Power’s access or use of the Facebook website was “without permission” within the meaning of Section 502.

EFF contends that even if Power evaded the technical barriers that Facebook implemented to deny it access, Power’s conduct does not fall within the scope of Section 502 liability. (Amicus Brief at 19-28.) More specifically, EFF contends that it would be inconsistent to allow liability for ignoring or bypassing technical barriers whose sole purpose is to enforce contractual limits on access while denying liability for violating those same contractual limits when technological means of restricting access are not employed. (Id. at 19.) Thus, according to EFF, Power’s efforts to circumvent Facebook’s IP-blocking efforts did not violate Section 502 because Facebook was merely attempting to enforce its Terms of Use by other means.24 (Id. at 23-24.) The Court finds EFF’s contentions unpersuasive in this regard. EFF has not pointed to any meaningful distinction between IP address blocking and any other conceivable technical barrier that would adequately justify not finding Section 502 liability in one instance while finding it in the other. Moreover, the owners’ underlying purpose or motivation for implementing technical barriers, whether to enforce terms of use or otherwise, is not a relevant consideration when determining the appropriate scope of liability for accessing a computer or network without authorization. There can be no ambiguity or mistake as to whether access has been authorized when one encounters a technical block, and thus there is no potential failure of notice to the computer user as to what conduct may be subject to criminal liability, as when a violation of terms of use is the sole basis for liability.

Accordingly, the Court DENIES Facebook’s Motion for Judgment on the Pleadings, and DENIES the parties’ Cross-Motions for Summary Judgment as to Facebook’s Section 502 cause of action.

United States District Court,S.D. New York.

In re DOUBLECLICK INC. PRIVACY LITIGATION,

154 F.Supp.2d 497

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March 28, 2001.

OPINION AND ORDER

Buchwald, District Judge.

Plaintiffs bring this class action on behalf of themselves and all others similarly situated8 against defendant DoubleClick, Inc. ("defendant" or "DoubleClick") seeking injunctive and monetary relief for injuries they have suffered as a result of DoubleClick's purported illegal conduct. Specifically, plaintiffs bring three claims under federal laws: (1) 18 U.S.C. § 2701, et seq.; (2) 18 U.S.C. § 2510, et seq.; (3) 18 U.S.C. § 1030, et seq.; and four claims under state laws: (1) common law invasion of privacy; (2) common law unjust enrichment; (3) common law trespass to property; and (4) Sections 349(a) and 350 of Article 22A of the New York General Business Law.

Now pending is DoubleClick's motion, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss Claims I, II and III of the Amended Complaint for failure to state a claim on which relief can be granted. For the reasons discussed below, DoubleClick's motion is granted and the Amended Complaint is dismissed with prejudice.

PROCEDURAL HISTORY

This case is a multidistrict consolidated class action. The initial complaint was filed in this Court on January 31, 2000. On May 10, 2000, this Court consolidated the set of related federal class actions against DoubleClick in the Southern and Eastern Districts of New York pursuant to Rule 42(a) of the Fed.R.Civ.P. and Local Rule 1.6 of the Southern and Eastern Districts of New York. [FN2] The consolidated class filed its Amended Complaint on May 26, 2000. Later, pursuant to 28 U.S.C. § 1407(a), the Judicial Panel on Multidistrict Litigation transferred two cases to this Court for pretrial proceedings: Steinbeck v. DoubleClick, 00 Civ. 5705, C.A, N.O. 8:00-98 (C.D.Cal) on July 31, 2000 and Freedman v. DoubleClick, 00 Civ. 7194, 2:00- 1559 (E.D.La) on September 22, 2000.

FN2. Healy v. DoubleClick, 00 Civ. 0641(NRB); Donaldson v. DoubleClick, 00 Civ. 0696(RMB); Wong v. DoubleClick, 00 Civ. 1253(NRB); Mandel v. DoubleClick, 00 Civ. 1290(RMB); Cohen v. DoubleClick, 00 Civ. 1349(JSM); Katz v. DoubleClick, 00 Civ. 1552 (UN-RMB); Bruce v. DoubleClick, 00 Civ. 1572(JGK); Gibson v. DoubleClick, 00 Civ. v1596 (U- RMB); Lehner v. DoubleClick, 00 Civ. 1813 (U-NRB); Gassman v. DoubleClick, 00 Civ. 1897 (U-NRB); Rand v. Doubleclick 00 Civ. 6398(NRB).

BACKGROUND

8 The class is defined as "All persons who, since 1/1/96, have had information about them gathered by DoubleClick as a result of viewing any DoubleClick products or services on the Internet or who have had DoubleClick 'cookies,' as defined below, placed upon their computers." Plaintiffs' May 26, 2000 Amended Complaint ("Amended Complaint") at ¶ 1.

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DoubleClick, a Delaware corporation, is the largest provider of Internet advertising products and services in the world. Its Internet-based advertising network of over 11,000 Web publishers has enabled DoubleClick to become the market leader in delivering online advertising. DoubleClick specializes in collecting, compiling and analyzing information about Internet users through proprietary technologies and techniques, and using it to target online advertising. DoubleClick has placed billions of advertisements on its clients' behalf and its services reach the majority of Internet users in the United States.

THE INTERNET

Although a comprehensive description of the Internet is unnecessary to address the issues raised in this motion, a rudimentary grasp of its architecture and engineering is important. [FN4] The Internet is accurately described as a "network of networks." Computer networks are interconnected individual computers that share information. Anytime two or more computer networks connect, they form an "internet." The "Internet" is a shorthand name for the vast collection of interconnected computer networks that evolved from the Advanced Research Projects Agency Network ("ARPANet") developed by the United States Defense Department in the 1960's and 1970's. Today, the Internet spans the globe and connects hundreds of thousands of independent networks.

FN4. See generally Reno v. ACLU, 521 U.S. 844, 117 S.Ct. 2329, 138 L.Ed.2d 874 (1997) (description of the Internet).

The World Wide Web ("the Web" or "WWW") is often mistakenly referred to as the Internet. However, the two are quite different. The Internet is the physical infrastructure of the online world: the servers, computers, fiber- optic cables and routers through which data is shared online. The Web is data: a vast collection of documents containing text, visual images, audio clips and other information media that is accessed through the Internet. Computers known as "servers" store these documents and make them available over the Internet through "TCP/IP" (Transmission Control Protocol/Internet Protocol), a set of standard operating and transmission protocols that structure the Web's operation. Every document has a unique "URL" (Universal Resource Locator) that identifies its physical location in the Internet's infrastructure. Users access documents by sending request messages to the servers that store the documents. When a server receives a user's request (for example, for Lycos.com's home page), it prepares the document and then transmits the information back to the user.

The Internet utilizes a technology called "packet switching" to carry data. Packet switching works as follows. The computer wishing to send a document ("originating computer"), such as a music file or digital image, cuts the document up into many small "packets" of information. Each packet contains the Internet Protocol ("IP") address of the destination Web site, a small portion of data from the original document, and an indication of the data's place in the original document. The originating computer then sends all of the packets through its local network to

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an external "router." A router is a device that contains continuously-updated directories of Internet addresses called "routing tables." The router takes each packet from the original document and sends it to the next available router in the direction of the destination Web site. Because each router is connected to many other routers and because the connection between any two given routers may be congested with traffic at a given moment, packets from the same document are often sent to different routers. Each of these routers, in turn, repeats this process, forwarding each packet it receives to the next available router in the direction of the destination Web site. Collectively, this process is called "dynamic routing."

The result is that packets of information from the originating computer may take entirely different routes over the Internet (i.e., traveling over different routers and cables) to their ultimate destination. Obviously, the packets arrive out of their original order because some have been forced to take much longer or slower routes between the originating and destination computers. [FN5] However, because each packet contains code that identifies its place in the original document, the destination computer is able to reassemble the original document from the disorganized packets. At that point, the destination computer sends a message back to the originating computer either reporting that it received the full message, or requesting that the originating computer re-send any packets that never arrived. This entire process typically occurs in a matter of seconds. Packet-switching technology and dynamic routing have helped to give the Internet's infrastructure its extraordinary efficiency and resiliency.

FN5. For example, if a computer in New York sent a document to one in Boston, some packets might travel through routers and cables directly up the east coast while other packets might be sent by way of Seattle or Denver, due to momentary congestion on the east coast routes.

DOUBLECLICK'S TECHNOLOGY AND SERVICES

DoubleClick provides the Internet's largest advertising service. Commercial Web sites often rent-out online advertising "space" to other Web sites. In the simplest type of arrangement, the host Web site (e.g., Lycos.com) rents space on its webpages to another Web site (e.g., TheGlobe.com) to place a "hotlink" banner advertisement [FN6] ("banner advertisement"). When a user on the host Web site "clicks" on the banner advertisement, he is automatically connected to the advertiser's designated Web site.

FN6. As plaintiffs explain, "Banner advertisements are so named because they generally resemble flags or banners, in that they tend to be long and narrow and their width often spans a significant part of a Web page." Amended Complaint at ¶ 60.

DoubleClick acts as an intermediary between host Web sites and Web sites seeking to place banner advertisements. It promises client Web sites that it will

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place their banner advertisements in front of viewers who match their demographic target. For example, DoubleClick might try to place banner advertisements for a Web site that sells golfclubs in front of high-income people who follow golf and have a track record of making expensive online purchases. DoubleClick creates value for its customers in large part by building detailed profiles of Internet users [FN7] and using them to target clients' advertisements.

FN7. It is important to note that the term "user" actually refers to a particular computer, not a particular person. DoubleClick collects information based upon the computer's Web activity, regardless of whether one person or one hundred people happen to use that computer. In the same vein, if one person uses multiple computers, DoubleClick would be unable to identify and aggregate the person's activity on different computers.

DoubleClick compiles user profiles utilizing its proprietary technologies and analyses in cooperation with its affiliated Web sites. DoubleClick is affiliated with over 11,000 Web sites for which and on which it provides targeted banner advertisements. A select group of over 1,500 of these Web sites form the "DoubleClick Network" and are among "the most highly trafficked and branded sites on the Web." In addition, DoubleClick owns and operates two Web sites through which it also collects user data: (1) the Internet Address Finder ("IAF"); and (2) NetDeals.com. [FN8]

FN8. Plaintiffs allege that IAF is marketed as the most comprehensive e-mail directory on the Internet. Netdeals.com is a "sweepstakes" and catalog Web site. Both Web sites allegedly require users to submit personal information in order to use the services.

When users visit any of these DoubleClick-affiliated Web sites, a "cookie" is placed on their hard drives. [FN9] Cookies are computer programs commonly used by Web sites to store useful information such as usernames, passwords, and preferences, making it easier for users to access Web pages in an efficient manner. However, Plaintiffs allege that DoubleClick's cookies collect "information that Web users, including plaintiffs and the Class, consider to be personal and private, such as names, e-mail addresses, home and business addresses, telephone numbers, searches performed on the Internet, Web pages or sites visited on the Internet and other communications and information that users would not ordinarily expect advertisers to be able to collect." Amended Complaint at ¶ 38. DoubleClick's cookies store this personal information on users' hard drives until DoubleClick electronically accesses the cookies and uploads the data.

FN9. If a DoubleClick cookie already exists on the user's hard drive, another is not placed.

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How DoubleClick targets banner advertisements and utilizes cookies to collect user information is crucial to our analysis under the three statutes. Therefore, we examine both processes in greater detail.

A. Targeting Banner Advertisements

DoubleClick's advertising targeting process involves three participants and four steps. The three participants are: (1) the user; (2) the DoubleClick- affiliated Web site; (3) the DoubleClick server. [FN10] For the purposes of this discussion, we assume that a DoubleClick cookie already sits on the user's computer with the identification number "# 0001."

FN10. DoubleClick actually has a great number of servers, but for the purpose of describing the process, it is easier to imagine just one.

In Step One, a user seeks to access a DoubleClick-affiliated Web site such as Lycos.com. The user's browser [FN11] sends a communication to Lycos.com (technically, to Lycos.com's server) saying, in essence, "Send me your homepage." U.S. Patent No. 5,948,061 (issued September 7, 1999) ("DoubleClick Patent"), col. 3, ll. 6-9. This communication may contain data submitted as part of the request, such as a query string or field information.

FN11. A browser is a computer program through which a user communicates on the Web.

In Step Two, Lycos.com receives the request, processes it, and returns a communication to the user saying "Here is the Web page you requested." The communication has two parts. The first part is a copy of the Lycos.com homepage, essentially the collection article summaries, pictures and hotlinks a user sees on his screen when Lycos.com appears. The only objects missing are the banner advertisements; in their places lie blank spaces. Id. at col. 3, ll. 28-34. The second part of the communication is an IP-address link to the DoubleClick server. Id. at col. 3, ll. 35-38. This link instructs the user's computer to send a communication automatically to DoubleClick's server.

In Step Three, as per the IP-address instruction, the user's computer sends a communication to the DoubleClick server saying "I am cookie # 0001, send me banner advertisements to fill the blank spaces in the Lycos.com Web page." This communication contains information including the cookie identification number, the name of the DoubleClick-affiliated Web site the user requested, and the user's browser-type. Id. at col. 3, ll. 41-52.

Finally, in Step Four, the DoubleClick server identifies the user's profile by the cookie identification number and runs a complex set of algorithms based, in part, on the user's profile, to determine which advertisements it will present to the user. Id. at col. 3, ll. 52-57, col. 5, l. 11--col. 6, l. 59. It then sends a communication to the

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user with banner advertisements saying "Here are the targeted banner advertisements *504 for the Lycos.com homepage." Meanwhile, it also updates the user's profile with the information from the request. Id. at col. 6, l. 60--col. 7, l. 14.

DoubleClick's targeted advertising process is invisible to the user. His experience consists simply of requesting the Lycos.com homepage and, several moments later, receiving it complete with banner advertisements.

B. Cookie Information Collection

DoubleClick's cookies only collect information from one step of the above process: Step One. The cookies capture certain parts of the communications that users send to DoubleClick-affiliated Web sites. They collect this information in three ways: (1) "GET" submissions, (2) "POST" submissions, and (3) "GIF" submissions.

GET information is submitted as part of a Web site's address or "URL," in what is known as a "query string." For example, a request for a hypothetical online record store's selection of Bon Jovi albums might read: http:// recordstore.hypothetical. com/ search?terms=bonjovi. The URL query string begins with the "?" character meaning the cookie would record that the user requested information about Bon Jovi.

Users submit POST information when they fill-in multiple blank fields on a webpage. For example, if a user signed-up for an online discussion group, he might have to fill-in fields with his name, address, email address, phone number and discussion group alias. The cookie would capture this submitted POST information.

Finally, DoubleClick places GIF tags on its affiliated Web sites. GIF tags are the size of a single pixel and are invisible to users. Unseen, they record the users' movements throughout the affiliated Web site, enabling DoubleClick to learn what information the user sought and viewed.

Although the information collected by DoubleClick's cookies is allegedly voluminous and detailed, it is important to note three clearly defined parameters. First, DoubleClick's cookies only collect information concerning users' activities on DoubleClick-affiliated Web sites. [FN12] Thus, if a user visits an unaffiliated Web site, the DoubleClick cookie captures no information. Second, plaintiff does not allege that DoubleClick ever attempted to collect any information other than the GET, POST, and GIF information submitted by users. DoubleClick is never alleged to have accessed files, programs or other information on users' hard drives. Third, DoubleClick will not collect information from any user who takes simple steps to prevent DoubleClick's tracking. As plaintiffs' counsel demonstrated at oral argument, users can easily and at no cost prevent DoubleClick from collecting information from them. They may do this in two ways: (1) visiting the DoubleClick Web site and requesting an "opt-out" cookie; and (2) configuring their browsers to block any cookies from *505 being deposited. Transcript of February 22, 2001 Oral Argument at 15-18.

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FN12. See Amended Complaint at ¶ 6 ("Thus, through DoubleClick's relationships with Web publishers and advertisers located throughout the United States, defendant has secretly obtained personal and private information from plaintiffs and the Class members."); ¶ 42 ("When a user visits a Web site utilizing DoubleClick's advertising products and services ..."); ¶ 45 ("DoubleClick's technology wrongfully monitors Internet users' activities at each and every Web site the users visit at which DoubleClick's products or services are utilized."); ¶ 68 ("Once DoubleClick implants a cookie onto a user's computer, DoubleClick is automatically able to access, read and update that cookie on any of the other 11,000 or so Web sites where it has a presence ..."); Transcript of February 22, 20001 Oral Argument at 7-8 (admission by plaintiffs' counsel that information is only collected from DoubleClick-affiliated Web sites).

Once DoubleClick collects information from the cookies on users' hard drives, it aggregates and compiles the information to build demographic profiles of users. Plaintiffs allege that DoubleClick has more than 100 million user profiles in its database. Exploiting its proprietary Dynamic Advertising Reporting & Targeting ("DART") technology, DoubleClick and its licensees [FN13] target banner advertisements using these demographic profiles.

FN13. DoubleClick allegedly licenses its DART technology to thousands of Web sites who utilize it to target banner advertisements on their own.

ABACUS ACQUISITION AND FTC INVESTIGATION

In June 1999, DoubleClick purchased Abacus Direct Corp. ("Abacus") for more than one billion dollars. Abacus was a direct-marketing services company that maintained a database of names, addresses, telephone numbers, retail purchasing habits and other personal information on approximately ninety percent of American households, which it sold to direct marketing companies. Plaintiffs allege that DoubleClick planned to combine its database of online profiles with Abacus' database of offline customer profiles in order to create a super- database capable of matching users' online activities with their names and addresses.

In furtherance of this effort, DoubleClick created the Abacus Online Alliance ("Abacus Alliance") and amended its privacy policy. The Abacus Alliance is purportedly a confidential group of online marketers and publishers who secretly contribute their compiled customer data to a cooperative database managed by DoubleClick. In return for their contributions, Abacus Alliance members gain access to exclusive DoubleClick products and services. In mid- 1999, shortly after acquiring Abacus, DoubleClick amended its privacy policy by removing its assurance that information gathered from users online would not be associated with their personally identifiable information.

Not long after the Abacus acquisition, the Federal Trade Commission ("FTC")

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launched an investigation into whether DoubleClick's collection, compilation and use of consumer information constituted unfair or deceptive trade practices in violation of Section 5 of the Federal Trade Commission Act. [FN14] On March 2, 2000, Kevin O'Connor, DoubleClick's CEO and Chairman of the Board, announced that he had made a "mistake" by planning to merge DoubleClick's and Abacus' databases and stated that DoubleClick would undertake no such merger until it reached an agreement with the United States government and Internet industry regarding privacy standards. It is unclear whether DoubleClick had already merged any of the information. [FN15]

FN14. Specifically, "[t]he primary purposes of the inquiry were: 1) whether [DoubleClick] used or disclosed consumers' PII [personal identifying information] for purposes other than those disclosed in, or in contravention of, its privacy policy, including in particular, whether it combined PII from Abacus Direct (an offline direct marketing company that it had acquired) with non-PII clickstream data that DoubleClick had collected; and 2) whether [DoubleClick] used or disclosed sensitive information about consumers in contravention of its stated privacy policy." Letter from Joel Winston, Acting Associate Director, Division of Financial Practices, FTC, to Christine Varney, Esq., Hogan & Hartson, Outside Counsel for DoubleClick, January 22, 2001 ("FTC January 22, 2001 Letter.").

FN15. Plaintiffs allege that in February 2000 (prior to O'Connor's announcement), DoubleClick President Kevin Ryan stated that DoubleClick had already merged between 50,000 and 100,000 records from online and offline databases. Amended Complaint at ¶ 82. However, the FTC, in its January 22, 2001 letter ending its DoubleClick investigation, found "[s]pecifically, it appears that DoubleClick did not combine PII from Abacus Direct with clickstream collected on client Web sites." For the purposes of this motion, we assume the truth of plaintiffs' pleadings.

The FTC concluded its investigation on January 22, 2001. In a letter to DoubleClick's outside counsel, the FTC announced that it was ending its investigation with no finding that DoubleClick had engaged in unfair or deceptive trade practices. It summarized its conclusions:

Based on this investigation, it appears to staff that DoubleClick never used or disclosed consumers' PII [personal identifiable information] for purposes other than those disclosed in its privacy policy. Specifically, it appears that DoubleClick did not combine PII from Abacus Direct with clickstream collected on client Web sites. In addition, it appears that DoubleClick has not used sensitive data for any online preference marketing product, in contravention of its stated online policy. We understand that DoubleClick's Boomerang product takes user data from one site to target advertising to the same user on other sites. However, the user profiles DoubleClick creates for its Boomerang clients for this targeting contains only non-PII. Furthermore, we understand that for all new Boomerang clients, DoubleClick requires by contract that the site disclose in its privacy policy that it

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uses DoubleClick's services to target advertising to consumers, and DoubleClick will not implement Boomerang on a site until such disclosures are posted. [FN16]

FN16. FTC January 22, 2001 Letter.

The letter also noted several commitments DoubleClick made to modifying its privacy policy to "enhance its effectiveness," including allowing a user to request an "opt out" cookie that would prevent DoubleClick from collecting information from that user.

DISCUSSION

Defendants move to dismiss plaintiffs' claims, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief may be granted. In considering a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), we accept as true all material factual allegations in the Amended Complaint, Atlantic Mutual Ins. Co. v. Balfour Maclaine Int'l, Ltd., 968 F.2d 196, 198 (2d Cir.1992) , and may grant the motion only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Still v. DeBuono, 101 F.3d 888, 891 (2d Cir.1996); see Conley v. Gibson, 355 U.S. 41, 48, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). "General, conclusory allegations need not be credited, however, when they are belied by more specific allegations of the complaint." Hirsch v. Arthur Andersen & Co., 72 F.3d 1085 (2d Cir.1995) (citing Jenkins v. S & A Chaissan & Sons, Inc., 449 F.Supp. 216, 227 (S.D.N.Y.1978) ); 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1363, at 464-65 (2d ed.1990). In addition to the facts set forth in the Amended Complaint, we may also consider documents attached thereto and incorporated by reference therein, Automated Salvage Transp., Inc. v. Wheelabrator Envtl., Sys., Inc., 155 F.3d 59, 67 (2d. Cir.1998) , matters of public record such as case law and statutes, Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 75 (2d. Cir.1998) , and matters of judicial notice. See Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir.1993) ; Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir.1991) .

Claim I. Title II of the ECPA

Title II ("Title II") of the Electronic Communications Privacy Act ("ECPA"), 18 U.S.C. § 2701 et seq. (" § 2701"), aims to prevent hackers from obtaining, altering or destroying certain stored electronic communications. See Sherman & Co. v. Salton Maxim Housewares, Inc., 94 F.Supp.2d 817, 820 (E.D.Mich.2000) ("the ECPA was primarily designed to provide a cause of action against computer hackers") (quoting State Wide Photocopy Corp. v. Tokai Fin. Serv., Inc., 909 F.Supp. 137, 145 (S.D.N.Y.1995)). It creates both criminal sanctions and a civil right of action [FN17] against persons who gain unauthorized access to communications facilities and thereby access electronic communications stored incident to their transmission. Title II specifically defines the relevant prohibited conduct as follows:

FN17. 18 U.S.C. § 2707 ("§ 2707") creates a civil action against ECPA violators by "any provider of electronic communication service, subscriber, or

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other person aggrieved by a violation of this chapter in which the conduct constituting the violation is engaged in with a knowing or intentional state of mind ..."

"(a) Offense. Except as provided in subsection (c) of this section whoever(1) intentionally accesses without authorization a facility through which an electronic information service is provided; or (2) intentionally exceeds an authorization to access that facility; and thereby obtains ... access to a wire or electronic communication while it is in electronic storage in such system shall be punished...."

Plaintiffs contend that DoubleClick's placement of cookies on plaintiffs' hard drives constitutes unauthorized access and, as a result, DoubleClick's collection of information from the cookies violates Title II. However, Title II contains an exception to its general prohibition.

"(c) Exceptions.-Subsection (a) of this section does not apply with respect to conduct authorized... (2) by a user of that [wire or electronic communications] service with respect to a communication of or intended for that user;"

DoubleClick argues that its conduct falls under this exception. It contends that the DoubleClick-affiliated Web sites are "users" of the Internet and that all of plaintiffs' communications accessed by DoubleClick's cookies have been "of or intended for" these Web sites. Therefore, it asserts, the Web sites' authorization excepts DoubleClick's access from § 2701(a)'s general prohibition.

We must first address the threshold issue of whether DoubleClick's argument that its conduct falls under a statutory exception is resolvable on a motion to dismiss. Plaintiffs contend that the issue turns on whether exception § 2701(c)(2) is considered an affirmative defense or a statutory element of the offense. As a general matter, a plaintiff need not plead denials of affirmative defenses, see Harris v. City of New York, 186 F.3d 243, 251 (2d Cir.1999) (citing 5 Charles Wright & Arthur Miller, Federal Practice and Procedure: Civil 2d § 1276 (2d ed.1990 & 1999 pocket part)), whereas courts may dismiss a claim based on a statutory exception that appears on the face of the complaint. See Orton v. Pirro, Collier, et al., No. 95 Civ. 3056, 1996 WL 18831, at *2 (S.D.N.Y. Jan. 18, 1996) (dismissing ECPA Title III claim where statutory consent exception appeared in the complaint).

Examining the statute, it appears that § 2701(c) is a statutory exception. First, § 2701(c) is entitled "Exceptions" and states "Subsection (a) of this section does not apply with respect to conduct ..." *508 Second, § 2701(a) reinforces § 2701(c)'s function by carving our § 2701(c)'s exceptions in the very definition of the offense: "§ 2701(a) Offense.-Except as provided in subsection (c) of this section ..." Third, § 2707, the section that provides for a civil cause of action, subsection (e), is entitled "Defense" and specifies three affirmative defenses to civil claims under § 2707. Presumably, if Congress had intended § 2701(c)(1-3) to constitute affirmative defenses, it could have labeled them as such as it did in § 2707. Fourth, nothing in the legislative history suggests that § 2701(c) should be considered an affirmative defense instead of a statutory exception. Thus, if DoubleClick's conduct falls into one of § 2701(c)'s exceptions on the face of the pleadings, it is proper for us to dismiss the claim as one within a statutory exception. Furthermore, even if § 2701(c) was construed as an affirmative defense, the Second Circuit has held that a court may properly dismiss a claim on

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the pleadings when an affirmative defense appears on its face. See Day v. Moscow, 955 F.2d 807, 811 (2d Cir.1992) ( "[W]hen all relevant facts are shown by the court's own records, of which the court takes notice, the [affirmative] defense may be upheld on a Rule 12(b)(6) motion without requiring an answer"); see generally 2 James Wm. Moore et al., Moore's Federal Practice § 12.34[4][b] (3d ed.2000).

Assuming that the communications are considered to be in "electronic storage," it appears that plaintiffs have adequately pled that DoubleClick's conduct constitutes an offense under § 2701(a), absent the exception under § 2701(c)(2). Therefore, the issue is whether DoubleClick's conduct falls under § 2701(c)(2)'s exception. This issue has three parts: (1) what is the relevant electronic communications service?; (2) were DoubleClick- affiliated Web sites "users" of this service?; and (3) did the DoubleClick- affiliated Web sites give DoubleClick sufficient authorization to access plaintiffs' stored communications "intended for" those Web sites?

A. "Internet Access" is the relevant electronic communications service.

Obviously, in a broad sense, the "Internet" is the relevant communications service. [FN18] However, for the purposes of this motion, it is important that we define Internet service with somewhat greater care and precision. Plaintiff, at turns, argues that the electronic communications service is "Internet access" and "the ISP [Internet Service Provider]." Plaintiffs' Opposition Brief at 8, 12. The difference is important. An ISP is an entity that provides access to the Internet; examples include America Online, UUNET and Juno. Access to the Internet is the service an ISP provides. Therefore, the "service which provides to users thereof the ability to send or receive wire or electronic communications" is "Internet access."

FN18. The ECPA defines "electronic communications service" as "any service which provides to users thereof the ability to send or receive wire or electronic communications." 18 U.S.C. § 2510(15). In turn, "electronic communications" are defined as "any transfer of signs, signals, writing, images, sounds, data, or intelligence of any nature transmitted in whole or in part by a wire, radio, electromagnetic, photoelectric, or photooptical system that affects interstate or foreign commerce." 18 U.S.C. § 2510(12).

B. Web Sites are "users" under the ECPA.

The ECPA defines a "user" as "any person or entity who (A) uses an electronic communication service; and (B) is duly authorized by the provider of such service to engage in such use." 18 U.S.C. § 2510(13). On first reading, the DoubleClick-affiliated Web sites appear to be *509 users--they are (1) "entities" that (2) use Internet access and (3) are authorized to use Internet access by the ISPs to which they subscribe. However, plaintiffs make two arguments that Web sites nevertheless are not users. Both are unpersuasive.

First, plaintiffs argue that "[t]he most natural reading of 'user' is the person

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who has signed up for Internet access, which means the individual plaintiffs and Class members--not the Web servers." Plaintiffs' Opposition Brief at 12. Insofar as this argument implies that the statute meant to differentiate between human and non-human users, it is clearly contradicted by the statute's language that defines a "user" as "any person or entity ..." (emphasis added). Furthermore, it rests on the erroneous assumption that only human users "sign[ ] up for Internet access," not Web sites or servers. This court takes judicial notice of the fact that all people and entities that utilize Internet access subscribe to ISPs or are ISPs. Although the vast majority of people who sign-up for Internet access from consumer-focused ISPs such as America Online and Juno are individuals, every Web site, company, university, and government agency that utilizes Internet access also subscribes to an ISP or is one. These larger entities generally purchase "Internet access" in bulk from ISPs, often with value-added services and technologically advanced hardware. Nevertheless, they purchase the same underlying Internet access as individual users. Therefore, plaintiffs fail to distinguish class members from Web sites and servers based on whether they subscribe to an ISP for Internet access.

Second, plaintiffs argue that "[t]he individual plaintiff ('user') owns the personal computer ('facility'), while the Web sites she visits do not. [And that] [u]nder basic property and privacy notions, therefore, only she can authorize access to her own messages stored on that facility." Plaintiffs' Opposition Brief at 12. Again, plaintiffs seem to ignore the statute's plain language. The general rule under § 2701(a) embodies plaintiffs' position that only those authorized to use a "facility" may consent to its access. Nevertheless, Congress explicitly chose to make § 2701(a)'s general rule subject to § 2701(c)(2)'s exception for access authorized by authors and intended recipients of electronic communications. Thus, plaintiffs' argument is essentially that this Court should ignore § 2701(c)(2) because Congress failed to take adequate account of "basic property and privacy notions." However, it is not this Court's role to revisit Congress' legislative judgments.

One final point bears mention, even though plaintiffs did not raise it. One could imagine a facially sensible argument that Web sites are not "users" of Internet access because they are passive storage receptacles for information; the human is the "user" and the Web site is what is used. However, the Internet's engineering belies this description. Because the Internet functions through packet-switching and dynamic routing, human users do not in any sense connect to a passive receptacle and obtain information. Indeed, no direct connection ever exists between the human user and the Web site. Rather, the human user sends a request to which the Web site must actively respond: processing the request, deciding whether to provide the information sought, obtaining the document from the server, translating the document into TCP/IP protocol, sending the packets and awaiting confirmation of their arrival. Indeed, in a practical sense, Web sites are among the most active "users" of Internet access--their existence and utility depend on it, unlike humans. Therefore, we find as a matter of law that the DoubleClick-affiliated Web sites are "users" of Internet access under the ECPA.

C. All of the communications DoubleClick has accessed through its cookies have been authorized or have fallen outside of Title II's scope.

Because plaintiffs only allege that DoubleClick accessed communications

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from plaintiffs to DoubleClick-affiliated Web sites, the issue becomes whether the Web sites gave DoubleClick adequate authorization under § 2701(c)(2) to access those communications. This issue, in turn, has two parts: (1) have the DoubleClick-affiliated Web sites authorized DoubleClick to access plaintiffs' communications to them?; and (2) is that authorization sufficient under § 2701(c)(2)?

1. The DoubleClick-affiliated Web sites have consented to DoubleClick's interception of plaintiffs' communications.

A plaintiff cannot survive a motion to dismiss a Title II claim based solely on the naked allegation that defendant's access was "unauthorized." A plaintiff must, "allege[ ] and proffer[ ] sufficient proofs to create a colorable claim that such access was 'unauthorized.' " See Sherman & Co. v. Salton Maxim Housewares, Inc., 94 F.Supp.2d 817, 820-821 (E.D.Mich.2000) (denying motion to amend complaint because "proposed claim under the ECPA does not state a claim," despite the fact plaintiff alleged access was unauthorized); cf. Hirsch v. Arthur Andersen & Co., 72 F.3d 1085 (2d Cir.1995) ("General, conclusory allegations need not be credited, however, when they are belied by more specific allegations of the complaint.") (citation omitted). In the instant case, plaintiffs have proffered no proofs whatsoever to support their bare assertion that Doubleclick's access was unauthorized. What is more, every fact they do allege supports the inference that the DoubleClick-affiliated Web sites did authorize DoubleClick's access.

Examining DoubleClick's technological and commercial relationships with its affiliated Web sites, we find it implausible to infer that the Web sites have not authorized DoubleClick's access. In a practical sense, the very reason clients hire DoubleClick is to target advertisements based on users' demographic profiles. DoubleClick has trumpeted this fact in its advertising, patents and Securities and Exchange filings. See infra notes 28-29 and accompanying text. True, officers of certain Web sites might not understand precisely how DoubleClick collects demographic information through cookies and records plaintiffs' travels across the Web. However, that knowledge is irrelevant to the authorization at issue--Title II in no way outlaws collecting personally identifiable information or placing cookies, qua such. All that the Web sites must authorize is that DoubleClick access plaintiffs' communications to them. As described in the earlier section "Targeting Banner Advertisements," the DoubleClick-affiliated Web sites actively notify DoubleClick each time a plaintiff sends them an electronic communication (whether through a page request, search, or GIF tag). The data in these notifications (such as the name of the Web site requested) often play an important role in determining which advertisements are presented to users. Plaintiffs have offered no explanation as to how, in anything other than a purely theoretical sense, the DoubleClick-affiliated Web sites could have played such a central role in the information collection and not have authorized DoubleClick's access. This purely theoretical possibility that a DoubleClick-affiliated Web site might have been so ignorant as to have been unaware of the defining characteristic of DoubleClick's advertising service-- the service the Web site knowingly and purposely purchased--and its own role in facilitating that service, is too remote to be the basis for extensive and costly discovery of DoubleClick and its affiliates. Therefore, we find that the DoubleClick-affiliated Web sites consented to DoubleClick's access of plaintiffs' communications

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to them.

2. DoubleClick is authorized to access plaintiffs' GET, POST and GIF submissions to the DoubleClick-affiliated Web sites.

Plaintiffs' GET, POST and GIF submissions to DoubleClick-affiliated Web sites are all "intended for" those Web sites. In the case of the GET and POST submissions, users voluntarily type-in information they wish to submit to the Web sites, information such as queries, commercial orders, and personal information. GIF information is generated and collected when users use their computer "mouse" or other instruments to navigate through Web pages and access information. Although the users' requests for data come through clicks, not keystrokes, they nonetheless are voluntary and purposeful. Therefore, because plaintiffs' GET, POST and GIF submissions to DoubleClick-affiliated Web sites are all "intended for" those Web sites, the Web sites' authorization is sufficient to except DoubleClick's access under § 2701(c)(2).

3. To the extent that the DoubleClick cookies' identification numbers are electronic communications, (1) they fall outside of Title II's scope, and (2) DoubleClick's access to them is otherwise authorized.

Plaintiffs argue that even if DoubleClick's access to plaintiffs' GET, POST and GIF submissions is properly authorized under § 2701(c)(2), the cookie identification numbers that accompany these submissions [FN19] are not because they are never sent to, or through, the Web sites. However, this argument too is unavailing.

FN19. This occurs in Step Three of the process as earlier described. See supra "Targeting Banner Advertisements."

(a) The Cookies' identification numbers are not in "electronic storage" and therefore are outside Title II's scope.

Putting aside the issue of whether the cookie identification numbers are electronic communications at all, DoubleClick does not need anyone's authority to access them. The cookies' long-term residence on plaintiffs' hard drives places them outside of § 2510(17)'s definition of "electronic storage" and, hence, Title II's protection. Section 2510(17) defines "electronic storage" as:

"(A) any temporary, intermediate storage of a wire or electronic communication incidental to the electronic transmission thereof; and (B) any storage of such communication by an electronic communication service for the purpose of backup protection of such communication." (emphasis added)

Clearly, the cookies' residence on plaintiffs' computers does not fall into § 2510(17)(B) because plaintiffs are not "electronic communication service" providers. [FN20]

FN20. 18 U.S.C. § 2510(15) defines an "electronic communications service" as "any service which provides to users thereof the ability to send or receive wire or electronic communications." Examples of providers in the Internet

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world would include ISPs such as America Online, Juno and UUNET, as well as, perhaps, the telecommunications companies whose cables and phone lines carry the traffic. Nowhere do plaintiffs allege that they are electronic service providers or allege facts that could give rise to this inference.

Section 2510(17)(A)'s language and legislative history make evident that "electronic storage" is not meant to include DoubleClick's cookies either. Rather, it appears that the section is specifically targeted at communications temporarily stored by electronic communications services incident to their transmission--for example, when an email service stores a message until the addressee downloads it. The statute's language explicitly refers to "temporary, intermediate" storage. Webster's Dictionary defines "temporary" as "lasting for a limited time," and "intermediate" as "being or occurring at the middle place...." Webster's Third New International Dictionary 2353, 1180 (1993). In other words, Title II only protects electronic communications stored "for a limited time" in the "middle" of a transmission, i.e. when an electronic communication service temporarily stores a communication while waiting to deliver it.

The legislative history reveals that Congress intended precisely this limited definition. In H. Rpt. 106-932 (2000), a House Report on a proposed amendment to Title II, the House Judiciary Committee explained that " '(A)ny temporary, intermediate storage' [in § 2510(17)(A) ] describes an e-mail message that is being held by a third party Internet service provider until it is requested to be read." Id. at note 6 (emphasis added). This definition is consistent with Congress' statements in 1986, when it passed the ECPA. Sen. Rep. No. 99-541 (1986)'s entire discussion of Title II deals only with facilities operated by electronic communications services such as "electronic bulletin boards" and "computer mail facilit[ies]," and the risk that communications temporarily stored in these facilities could be accessed by hackers. It makes no mention of individual users' computers, the issue in the instant case. Finally, Senator Patrick Leahy, a sponsor of the ECPA in 1986, recently proposed an amendment to the definition of "electronic storage" meant to clarify its scope. He proposed amending 2510(17)(A) to read:

(17) ["interim storage"] means- (A) "any temporary, intermediate storage [by an electronic communication service] of a wire or electronic communication incidental to the electronic transmission thereof ..." S. 106-3083, Sec. 3(a)(4) (2000).

This amendment lends further support to the conclusion that Congress' intent was to protect communications held in interim storage by electronic communication service providers.

Turning to the facts of this case, it is clear that DoubleClick's cookies fall outside § 2510(17)'s definition of electronic storage and, hence, § 2701' s scope. Plaintiffs plead that in contrast to most cookies' ephemeral existence, DoubleClick cookies remain on plaintiffs' computers "for a virtually indefinite time period," and that their indefinite existence is critical to their function. [FN21] Amended Complaint at ¶ 68. In plain language, "indefinite" existence is the opposite of "temporary," and the DoubleClick cookies's residence on plaintiffs' hard drives is certainly not an "intermediate" step in their transmission to another addressee. This plain language controls in the absence of any legislative history suggesting

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that Congress intended it to cover conduct like DoubleClick's. Indeed, if § 2510(17) were interpreted in the manner *513 plaintiffs advocate, Web sites would commit federal felonies every time they accessed cookies on users' hard drives, regardless of whether those cookies contained any sensitive information. This expansive reading of a criminal statute runs contrary to the canons of statutory interpretation and Congress' evident intent. See Jones v. United States, 529 U.S. 848, 120 S.Ct. 1904, 1907, 146 L.Ed.2d 902 (2000) ( "Ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity [citation omitted], and when choice must be made between two readings of what conduct Congress has made a crime, it is appropriate, before choosing the harsher alternative, to require that Congress should have spoken in language that is clear and definite. [citation omitted]"); Lurie v. Wittner, 228 F.3d 113, 125-6 (2nd Cir.2000) . Thus, because the cookies and their identification numbers are never in "electronic storage" under the ECPA, they are not protected by Title II and DoubleClick cannot be held liable for obtaining them.

FN21. We note plaintiffs' allegation that the DoubleClick-affiliated Web sites' responses to plaintiffs' requests are "placed in temporary, immediate [sic] storage on the client [plaintiffs'] computers incidental to the transmission of such electronic communications." Amended Complaint at ¶ 56. However, this allegation clearly does not encompass the cookies or their identification numbers because neither are ever sent from the DoubleClick-affiliated Web sites to plaintiffs.

(b) If the DoubleClick cookies' identification numbers are considered stored electronic communications, they are "of or intended for" DoubleClick and DoubleClick's acquisition of them does not violate Title II.

Even if we were to assume that cookies and their identification numbers were "electronic communication[s] ... in electronic storage," DoubleClick's access is still authorized. Section 2701(c)(2) excepts from Title II's prohibition access, authorized by a "user," to communications (1) "of" (2) "or intended for" that user. In every practical sense, the cookies' identification numbers are internal DoubleClick communications--both "of" and "intended for" DoubleClick. DoubleClick creates the cookies, assigns them identification numbers, and places them on plaintiffs' hard drives. The cookies and their identification numbers are vital to DoubleClick and meaningless to anyone else. In contrast, virtually all plaintiffs are unaware that the cookies exist, that these cookies have identification numbers, that DoubleClick accesses these identification numbers and that these numbers are critical to DoubleClick's operations.

In this sense, cookie identification numbers are much akin to computer bar- codes or identification numbers placed on "business reply cards" found in magazines. These bar-codes and identification numbers are meaningless to consumers, but are valuable to companies in compiling data on consumer responses (e.g. from which magazine did the consumer get the card?). Although consumers fill-out business reply cards and return them to companies by mail, the bar-codes and identification numbers that appear on the cards are purely internal administrative data for the companies. The cookie identification numbers are

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every bit as internal to DoubleClick as the bar-codes and identification numbers are to business reply mailers. Therefore, it seems both sensible to consider the identification numbers to be "of or intended for" DoubleClick and bizarre to describe them as "of or intended for" plaintiffs. Accordingly, because the identification numbers are "of or intended for" DoubleClick, it does not violate Title II for DoubleClick to obtain them from plaintiffs' electronic storage.

To summarize, plaintiffs' GET, POST and GIF submissions are excepted from § 2701(c)(2) because they are "intended for" the DoubleClick-affiliated Web sites who have authorized DoubleClick's access. The cookie identification numbers sent to DoubleClick from plaintiffs' computers fall outside of Title II's protection because they are not in "electronic storage" and, *514 even if they were, DoubleClick is authorized to access its own communications.

In light of the above findings, we rule that all of plaintiffs' communications accessed by DoubleClick fall under § 2701(c)(2)'s exception or outside Title II and, accordingly, are not actionable. Therefore, plaintiffs' claim under the Title II (Claim I) is dismissed.

Claim II. Wiretap Act

Plaintiffs' second claim is that DoubleClick violated the Federal Wiretap Act ("Wiretap Act"), 18 U.S.C. § 2510, et seq. The Wiretap Act provides for criminal punishment and a private right of action against: [FN22]

FN22. 18 U.S.C. § 2520 confers a private right of action to persons injured by violations of the Wiretap Act.

"any person who--(a) intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept wire, oral, or electronic communication [except as provided in the statute]." 18 U.S.C. § 2511.

For the purposes of this motion, DoubleClick concedes that its conduct, as pled, violates this prohibition. However, DoubleClick claims that its actions fall under an explicit statutory exception:

"It shall not be unlawful under this chapter for a person not acting under color of law to intercept a wire, oral, or electronic communication where such person is a party to the communication or where one of the parties to the communication has given prior consent to such interception unless such communication is intercepted for the purpose of committing any criminal or tortious act in violation of the Constitution or laws of the United States or any State." 18 U.S.C. § 2511(2)(d) (" § 2511(2)(d)") (emphasis added).

DoubleClick argues once again that the DoubleClick-affiliated Web sites have consented to its interceptions and, accordingly, that its conduct is exempted from the Wiretap Act's general prohibition as it was from the Title II's. Plaintiffs deny that the Web sites have consented and argue that even if the Web sites do consent, the exception does not apply because DoubleClick's purpose is to commit "criminal or tortious act[s]."

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As a preliminary matter, we find that the DoubleClick-affiliated Web sites are "parties to the communication[s]" from plaintiffs and have given sufficient consent to DoubleClick to intercept them. In reviewing the case law and legislative histories of Title II and the Wiretap Act, we can find no difference in their definitions of "user" (Title II) and "parties to the communication" (Wiretap Act) or "authorize" (Title II) and "consent" (Wiretap Act) [FN23] that would make our analysis of the Web sites' consent under Title II inapplicable to the Wiretap Act. See discussion supra Section I(C). Therefore, the issue before us is: assuming that DoubleClick committed every act alleged in the Amended Complaint, could this evince a "criminal or tortious" purpose on DoubleClick's part?

FN23. Indeed, courts have emphasized that "consent" must be construed broadly under the Wiretap Act. See United States v. Amen, 831 F.2d 373, 378 (2d Cir.1987) ("Congress intended the consent requirement to be construed broadly."); Griggs-Ryan v. Smith, 904 F.2d 112, 116 (1st Cir.1990) (citing United States v. Willoughby, 860 F.2d 15, 19 (2d Cir.1988) ).

In light of the DoubleClick-affiliated Web sites' consent, plaintiffs must allege "either (1) that the primary motivation, or (2) that a determinative factor in the actor's [DoubleClick's] motivation for *515 intercepting the conversation was to commit a criminal [or] tortious ... act." United States v. Dale, 991 F.2d 819, 841-42 (D.C.Cir.1993), cert. denied 510 U.S. 1030, 114 S.Ct. 650, 126 L.Ed.2d 607 (1993) (quoting United States v. Vest, 639 F.Supp. 899, 904 (D.Mass.1986) , aff'd, 813 F.2d 477 (1st Cir.1987)). However, in reviewing the sufficiency of plaintiffs' allegations, we bear in mind that the mere existence of [a] lawful purpose alone does not "sanitize a[n interception] that was also made for an illegitimate purpose." Sussman v. ABC, 186 F.3d 1200, 1202 (9th Cir.1999) , cert denied, 528 U.S. 1131, 120 S.Ct. 970, 145 L.Ed.2d 841 (2000).

Section 2511(2)(d)'s legislative history and caselaw make clear that the "criminal" or "tortious" purpose requirement is to be construed narrowly, covering only acts accompanied by a specific contemporary intention to commit a crime or tort. The Wiretap Act originally exempted from its prohibition any interception of a wire or oral communication where one of the parties to the communication consented. See 2 U.S.Code Cong. & Ad.News, 90th Cong., 2d Sess., p. 2182 (1968). [FN24] However, Senator Phillip Hart objected that the exemption was too permissive because it conceivably allowed a party to intercept a communication for the purpose of breaking the law and injuring others. He feared that parties would use secret recordings for "insidious purposes such as blackmail, stealing business secrets, or other criminal or tortious acts in violation of Federal or State laws." Id. at 2236. Senators Hart and McClellan proposed an amendment to narrow the exemption to acts with "criminal, tortious or injurious" purposes, part of which was enacted as § 2511(2)(d). The key distinction Senator Hart suggested should distinguish permissible from impermissible one-party consent recordings by private citizens was whether the defendant's intent in recording was to injure another party. [FN25] Compare 114 Cong.Rec. 14694-14695 (May 23, 1968) ("Such one-party consent is also prohibited when the party acts in any way with an intent to injure the other party to the conversation in any other way ... For example, ... for

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the purpose of blackmailing the other party, threatening him, or publicly embarrassing him") with S.Rep. No. 90-1097 (1968) at 2236-37 ("There are, of course, certain situations in which consensual electronic surveillances may be used for legitimate purposes ... [as with recordings made] without intending in any way to harm the nonconsenting party.") (emphasis added). Thus, the legislative record suggests that the element of "tortious" or "criminal" mens rea is required to establish a prohibited purpose under § 2511(2)(d).

FN24. The original language read: "It shall not be unlawful under this Chapter for a party to any wire or oral communication, or a person given prior authority by a party to this communication to intercept such communication." S.Rep. No. 90-1097 (1968) at 12.

FN25. As a basic rule of interpreting legislative history, "[the] explanation of the sponsor of the [statutory] language, is an 'authoritative guide to the statute's construction." Bowsher v. Merck & Co., Inc., 460 U.S. 824, 832-33, 103 S.Ct. 1587, 75 L.Ed.2d 580 (1983) (citing North Haven Board of Educ. v. Bell, 456 U.S. 512, 527, 102 S.Ct. 1912, 72 L.Ed.2d 299 (1982) .

Plaintiffs attempt to meet § 2511(2)(d)'s "purpose" requirement by arguing that their six non-Wiretap Act claims against DoubleClick "plead conduct that has underlying it a tortious purpose and/or that translates into tortious acts." Plaintiffs' Brief at 16. In other words, by virtue of its tortious acts, DoubleClick must have had a tortious purpose.

Courts applying § 2511(2)(d) have consistently ruled that a plaintiff cannot establish that a defendant acted with a "criminal or tortious" purpose simply by proving that the defendant committed any tort or crime. Recently, in Sussman v. ABC, 186 F.3d 1200 (9th Cir.1999) (Kozisnki, J.), the Ninth Circuit addressed a case in which a plaintiff sued the American Broadcasting Companies, Inc. ("ABC") under the Wiretap Act. The plaintiff argued that ABC could not avail itself of § 2511(2)(d) because the recording violated state privacy law and, therefore, ABC's purpose was "tortious." Judge Kozinski, writing for a unanimous panel, rejected plaintiff's argument and dismissed the Wiretap Act claim, explaining,

"[U]nder section 2511, 'the focus is not upon whether the interception itself violated another law; it is upon whether the purpose for interception--its intended use--was criminal or tortious ...' [citations omitted] Where the purpose [of a taping] is not illegal or tortious, but the means are, the victims must seek redress elsewhere ... Although ABC's taping may well have been a tortious invasion under state law, plaintiffs have produced no probative evidence that ABC had an illegal or tortious purpose when it made the tape." Id. at 1202.

The Ninth Circuit ruled similarly in Deteresa v. ABC, 121 F.3d 460 (9th Cir.1997), holding, "Deteresa [plaintiff] contends that 'Radziwill and ABC [defendants] were by the taping committing the aforesaid crimes and torts.' This argument begs the question. For this claim to survive summary judgment, Deteresa had to come forward with evidence to show that Radziwill taped the

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conversation for the purpose of violating Cal.Penal Code § 632, for the purpose of invading her privacy, for the purpose of defrauding her, or for the purpose of committing unfair business practices. The record is devoid of any such evidence." Id. at 467, n. 4.

The Seventh Circuit and Sixth Circuit have reached the same conclusion. In another case involving ABC, J.H. Desnick v. ABC, 44 F.3d 1345, 1353 (1995) (Posner, J.), the Seventh Circuit dismissed plaintiffs' CFAA claims because they failed to allege that defendants' purpose was tortious. Like Judge Kozisnki, Judge Posner held for a unanimous panel that the commission of a tortious act did not prove a tortious purpose. He found that ("[t]he defendants did not order the camera-armed testers into the Desnick Eye Center's premises in order to commit a crime or tort. Maybe the program as it was eventually broadcast was tortious ... But there is no suggestion that the defendants sent the testers into the Wisconsin and Illinois officers for the purpose of defaming plaintiffs ... [defendants' allegedly tortious act]"). Id. The Sixth Circuit similarly distinguished tortious conduct from purpose based on mens rea, stating: " 'It is the use of the interception with intent to harm rather than the fact of interception that is critical to liability....' " Boddie v. ABC, 881 F.2d 267, 270 (6th Cir.1989) (emphasis added) (quoting By-Prod Corp. v. Armen-Berry Co., 668 F.2d 956, 960 (7th Cir.1982) ).

A number of district courts have interpreted § 2511(2)(d) in the same manner. See, e.g., Medical Lab. Mgmt. Consultants v. ABC, 30 F.Supp.2d 1182, 1205 (D.Ariz.1998) ("[Plaintiffs] offer no support for the assertion that Defendants recorded the meeting for the purpose of committing a tort, which, as the statute indicates, is the proper focus of inquiry in a § 2511 claim. Even if Defendants were found liable for fraud, the question is not whether they are ultimately liable for conduct found to be tortious, but whether, at the time the recording took place, they recorded the conversation *517 with the express intent of committing a tort."); U.S. v. Kovolas, 1998 WL 452218,*4 (D.Mass. July 27, 1998) ("Kovolas argues that because the recording itself was made in violation of state law, it was made for the purpose of violating state law. The superficial logic of this argument has been rejected by at least one court [citation omitted] ... if state law were to render tortious conduct as defined by the very act of recording that Congress sought to permit, the provisions of § 2511(d) would be rendered meaningless."); Roberts v. Americable Intl., Inc., 883 F.Supp. 499, 503 (E.D.Ca.1995) (finding no "tortious purpose" in case where "there is no evidence, nor even any allegations that [defendant's] purpose in tape recording her supervisor was either criminal or tortious outside any allegations of violation of the [state] privacy laws."); Payne v. Norwest Corp., 911 F.Supp. 1299, 1304 (D.Mont.1995) , aff'd in part, rev'd in part and remanded on other grounds, 206 F.3d 92; United States v. DiFelice, 837 F.Supp. 81, 82 (S.D.N.Y.1993) ("Assuming that [the challenged] recordings violated Massachusetts law, that fact by itself does not establish that he intercepted the conversations 'for the purpose of committing [a] criminal or tortious act ...' ").

Plaintiffs seek to distinguish the weight of these precedents from the instant case on the ground that the bulk of the above cases involved news gathering and that Congress and courts have excepted this conduct on First Amendment considerations. Specifically, they point to the 1986 amendment of § 2511(2)(d), in which Congress reacted to a Sixth Circuit decision, Boddie v. American Broadcasting

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Cos., 731 F.2d 333 (6th Cir.1984) . When the Sixth Circuit decided Boddie, § 2511(2)(d)'s one-party consent exception did not apply to interceptions for the purpose of committing any "criminal, tortious, or other injurious act" (emphasis added). In Boddie, the Sixth Circuit ruled that the clause "other injurious act[s]" could provide a basis for holding defendants civilly liable, even when they had violated no civil or criminal law. Id. at 339. Congress worried that Boddie's broad interpretation of "injurious" could facilitate "attempts by parties to chill the exercise of First Amendment rights through the use of civil remedies under [the Wiretap Act]." S.Rep. No. 99-541, at 17 (1986) (Congress emphasized that it did not want § 2511(2)(d) to be "a stumbling block in the path" of investigative journalists who record conversations). In response, it removed "injurious" from section § 2511(2)(d). Thus, the legislative history supports the contention that Congress struck "injurious" conduct from § 2511(2)(d)'s one-party consent exception partly out of concern for the press. See Medical Lab. Mgmt. Consultants, 30 F.Supp.2d 1182, 1205-06 (discussing legislative history of § 2511(2)(d) and Congress' concern with protecting the media); Scott Golde, Media Organizations' Exposure to Liability Under the Federal Wiretapping Act: The Medical Laboratory Management Consultants Case, 76 Wash.U.L.Q. 431, 435 (1998) .

However, plaintiffs overreach when they argue that Congress and the courts created a general rule that "tortious purpose" exists wherever an intentional action is later determined to have constituted a tort, save when journalism is involved. Although Congress deleted "injurious" purpose from § 2511(2)(d) partly out of concern for press freedom, it in no way indicated that the press enjoyed special standing under the remaining terms of § 2511(2)(d). Had Congress wished to confer special protection on the press, it could have done so explicitly. Courts interpreting § 2511(2)(d) have drawn no distinction between media defendants and the general public. In cases involving media defendants, they have consistently grounded their demand for specific contemporary tortious or criminal purpose in § 2511(2)(d)'s general language and legislative history, not in an exception for the media. See Sussman v. ABC, 186 F.3d at 1202 ("If the district court interpreted section 2511 as containing a blanket exemption for journalists, we cannot agree. Congress could have drafted the statute so as to exempt all journalists from its coverage, but did not. Instead, it treated journalists just like any other party who tapes conversations surreptitiously.") (emphasis added); J.H. Desnick v. ABC, 44 F.3d at 1353 (analysis did not rely on fact that recording was made for investigative reporting, only that its purpose was non- tortious); Deteresa v. ABC, 121 F.3d 460, 467, n. 4 (analysis underlying finding that ABC did not violate § 2511(2)(d) because it had no "tortious purpose," in no way distinguished between media and non-media defendants). And in suits not involving journalism, courts have demanded evidence of the same tortious or criminal purpose. See, e.g., Roberts v. Americable Intl., Inc., 883 F.Supp. at 503 (finding no tortious purpose for recording in a employment discrimination action because "[t]he facts do not show at this point that [plaintiff] tape recorded to extort or blackmail her supervisor or company, nor do the facts presently show that she engaged in tape recording to cause emotional distress."); U.S. v. Kovolas, 1998 WL 452218 at *4 (criminal case with no media party involved); United States v. DiFelice, 837 F.Supp. at 82 (criminal case with no media party involved); see also, Thomas v. Pearl, 998 F.2d 447, 451 (7th Cir.1993) (in civil suit between basketball player and coach, Seventh Circuit held that "[Plaintiff] must show that [defendant] either intended to break the law or commit a tort against him

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in order to prove a violation of the federal statute.").

In the instant case, plaintiffs clearly allege that DoubleClick has committed a number of torts. However, nowhere have they alleged that DoubleClick's "primary motivation" or a "determining factor" in its actions has been to injure plaintiffs tortiously. The Amended Complaint does not articulate any facts that could support an inference that DoubleClick accessed plaintiffs' electronic communications with the "insidious" intent to harm plaintiffs or others. In fact, everything in the Amended Complaint suggests that DoubleClick has been consciously and purposefully executing a highly- publicized market-financed business model in pursuit of commercial gain--a goal courts have found permissible under § 2511(2)(d). [FN26] Its technology and business strategy have been described, and indeed promoted, in the company's Security and Exchange Commission ("SEC") filings [FN27] and have been the focus of numerous articles in prominent periodicals and newspapers. [FN28] Indeed, the intricate details of each proprietary technology challenged by plaintiffs are public record in DoubleClick's patents. See, e.g., U.S. Patent No. 5,948,061 (issued September 7, 1999). DoubleClick's purpose has plainly not been to perpetuate torts on millions of Internet users, but to make money by providing a valued service to commercial Web sites. If any of its practices ultimately prove tortious, then DoubleClick may be held liable for the resulting damage. However, a culpable mind does not accompany every tortious act. In light of the abundant evidence that DoubleClick's motivations have been licit and commercial and the utter lack of evidence that its intent has been tortious, we find as a matter of law that plaintiffs have failed to allege that DoubleClick has acted with a "tortious" purpose.

FN26. See Berger v. Cable News Network, Inc., No. 94-46-BLG-JDS, 1996 WL 390528, at *3 (D.Mont. Feb. 26, 1996) ("[§ 2511(2)(d) ] does not apply because this Court does not find that defendants made the recordings for the purpose of committing a crime or tortious act. Instead, the recordings were made for the purpose of producing a news story and for the defendants' commercial gain."), aff'd in part, rev'd in part, 129 F.3d 505 (9th Cir.1997), vacated and remanded, 526 U.S. 808, 119 S.Ct. 1706, 143 L.Ed.2d 978 (1999), aff'd in relevant part, 188 F.3d 1155 (9th Cir.1999) ; see also Russell v. ABC, No. 94 C 5678, 1995 WL 330920, at * 1, 1995 U.S.Dist.LEXIS 7528, at *4 (N.D.Ill. May 30, 1995) (citing, Desnick v. ABC, Inc., 44 F.3d at 1353-54).

FN27. See, e.g.,; DoubleClick, Inc., 10-K SEC filing (Dec. 31, 1999) at 4-5; DoubleClick, Inc., 10-K (Dec. 31, 1998) at 1-2, 6; DoubleClick, Inc., S-1 SEC filing (Dec. 16, 1997) at 3-4.

FN28. Media attention to privacy concerns with DoubleClick's technology pre-dated the instant lawsuit. See, e.g., Rachel Scheier, Internet privacy concerns DoubleClick's increasing power to compile info on Web users at issue, New York Daily News, January 27, 2000; Jennifer Tanaka, Getting Personal; Online shoppers will spend nearly $10 billion this holiday season. They'll surrender some of their privacy along with the cash, Newsweek,

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November 22, 1999; Robert O'Harrow Jr., Global Savvy Web 'Bug's' Impact on Privacy Draws Scrutiny Internet; Regulators are looking at stealth tool that tracks online users' activities and soon may be used to identify them by name, Los Angeles Times, November 15, 1999 at C2; Andrea Petersen and Jon G. Auerbach, Online Ad Titans Bet Big in Race to Trace Consumers' Web Tracks, Wall St. J., November 8, 1999 at B1; Leslie Miller and Elizabeth Weise, FTC studies 'profiling' by Web sites, USA Today, November 8, 1999, at 1A; Leslie Walker, Time to Let the Cookies Crumble?, Washington Post, November 4, 1999 at E1; Hiawatha Bray, They're watching you; More and more Web sites are tracking their users habits, Should you care?, The Boston Globe, February 11, 1999 at G6; Colin Beaven, They're watching you; Internet advertising tracking companies; includes a related article on Internet cookies, Esquire, August, 1997, No. 2, Vol. 128 at 104; Julia Angwin, Got Cookies?, S.F. Chron., March 11, 1997 at C4.

To summarize, we find that the DoubleClick-affiliated Web sites are "parties" to plaintiffs' intercepted communications under the Wiretap Act and that they consent to DoubleClick's interceptions. Furthermore, we find that plaintiffs have failed to allege that DoubleClick has intercepted plaintiffs' communications for a "criminal or tortious" purpose. Accordingly, we find that DoubleClick's actions are exempted from liability under the Wiretap Act by § 2511(2)(d) and, thus, we dismiss Claim II.

Count III. Computer Fraud and Abuse Act

Plaintiffs' final federal claim is under the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030, et seq. ("§ 1030") The CFAA provides:

"[18 U.S.C. § 1030] (a)--whoever ... (2)(c) intentionally accesses a computer without authorization, or exceeds authorized access, and thereby obtains ... information from any protected computer if the conduct involved an interstate or foreign communication ... shall be punished as provided in subsection (c) of this section."

The CFAA also provides a civil right of action for victims under 18 U.S.C. § 1030(g) ("§ 1030(g)"):

"(g) Any person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief. Damages for violations involving damage as defined in section (e)(8)(A) are limited to economic damages ..."

However, section 18 U.S.C. § 1030(e)(8) ("§ 1030(e)(8)") limits the "damage" civilly recoverable to the following instances:

"(e)(8) the term 'damage' means any impairment to the integrity or availability of data, a program, a system, or information that--(A) causes loss aggregating at least $5,000 in value during any 1-year period to one or more individuals; [B. Impairs medical care; C. Causes physical injury; D. Threatens public health or

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safety]." (emphasis added).

For the purposes of this motion, DoubleClick does not contest that plaintiffs' computers were "protected" under the CFAA or that its access was unauthorized. Instead, it claims that § 1030(e)(8) creates a $5,000 damages threshold for each individual class member and that plaintiffs have failed to plead these damages adequately. Plaintiffs argue that "loss" under § 1030(g) is distinct from "damage" and, accordingly, is not subject to § 1030(e)(8)'s damage threshold. In the alternative, if § 1030(e)(8)'s damage threshold is found applicable to plaintiffs' claims, plaintiffs argue that they easily meet the threshold by "aggregating" losses for the entire class over "any 1-year period."

A. "Loss" pled under 18 U.S.C. § 1030(g) is subject to § 1030(e)(8)'s $5,000 statutory minimum damages.

The first issue is whether "loss" pled under § 1030(g) is subject to § 1030(e)(8)'s $5,000 statutory minimum damages--a question of statutory interpretation. The Supreme Court recently reviewed the basic canons of statutory interpretation in Robinson v. Shell Oil Co., 519 U.S. 337, 340-41, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997). It explained:

"Our first step in interpreting a statute is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case. Our inquiry must cease if the statutory language is unambiguous and 'the statutory scheme is coherent and consistent.' [citations omitted]. The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole."

See Washington v. Schriver, 240 F.3d 101, 108 (2d Cir. Jan.5, 2001) .

However, where a statute's language conveys no "plain and unambiguous meaning," it is deemed "ambiguous" and a court may look to "legislative history and other extrinsic material" in interpreting it. Oklahoma v. New Mexico, 501 U.S. 221, 235 n. 5, 111 S.Ct. 2281, 115 L.Ed.2d 207 (1991) (citations omitted); see Washington, 240 F.3d at 108 .

Sections 1030(g) and 1030(e)(8)(A)'s language concerning "loss" is plainly inconsistent. On its face, § 1030(e)(8)(A)'s definition of "damage" explicitly includes "loss." See § 1030(e)(8)(A) ("the term 'damage' means any impairment ... that--(A) causes loss aggregating at least $5,000 in value during any 1-year period to one or more individuals") (emphasis added). In order to find that "loss" under § 1030(g) is not subject to the $5,000 "damage" threshold, one would have to accept that Congress created two definitions of "loss"--one under § 1030(g) that is not subject to § 1030(e)(8)'s $5,000 threshold, and one under § 1030(e)(8) that is clearly subject to the threshold--without explicitly defining or differentiating either. In contrast, the statute gives a clear definition of "damage" in § 1030(e)(8) to which it explicitly refers in § 1030(g).

Nevertheless, a "cardinal principle of statutory construction [is] that we must 'give effect, if possible, to every clause and word of a statute,' " Williams v. Taylor,

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529 U.S. 362, 404, 120 S.Ct. 1495, 146 L.Ed.2d 389 (2000) (quoting United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 99 L.Ed. 615 (1955) ) and this principle supports two arguments for reading "loss" outside of § 10(e)(8)(A)'s exception. First, the fact that § 1030(g) uses the word "loss" in addition to damage suggests that the words have different meanings. See United States v. Bernier, 954 F.2d 818, 819- 20 (2d Cir.1992) (in interpreting statutory clause "second or subsequent," the Second Circuit ruled that "[w]hile it is conceivable that the word 'subsequent' is used as a synonym for the word 'second' in [the clause], the use of the connector 'or' (rather than 'and'), and the absence of commas around the 'or subsequent' phrase, suggest that each word in the statute was meant to be different; hence the use of different words.") Second, § 1030(g) states that "[d]amages for violations involving damage as defined in subsection (e)(8)(A) are limited to economic damages." The fact that the statute chooses to limit this clause to "violations involving damage as defined in subsection (e)(8)(A)," suggests that it recognizes "damages" outside of subsection (e)(8)(A) as well. Otherwise, the limitation would be meaningless.

In light of the obvious facial contradictions, we find that the CFAA is ambiguous about whether "loss" pled under § 1030(g) is subject to § 1030(e)(8)'s $5,000 threshold. Accordingly, we turn to its legislative history for further guidance. The only explanation in the legislative record for why § 1030(g) refers to both "damage" and "loss" is found in the 1996 Senate Report, S.Rep. No. 104-357 (1996). It stated:

The 1994 amendment [to § 1030(g) ] required both 'damage' and 'loss,' but it is not always clear what constitutes 'damage.' For example, intruders often alter existing log-on programs so that user passwords are copied to a file which the hackers can retrieve later. After retrieving the newly created password file, the intruder restores the altered log-on file to its original condition. Arguably, in such a situation, neither the computer nor its information is damaged. Nonetheless, this conduct allows the intruder to accumulate valid user passwords to the system, requires all system users to change their passwords, and requires the system administrator to devote resources to resecuring the system. Thus, although there is arguably no 'damage,' the victim does suffer 'loss.' If the loss to the victim meets the required monetary threshold, the conduct should be criminal, and the victim should be entitled to relief. The bill therefore defines 'damage' in new subsection 1030(e)(8), with a focus on the harm that the law seeks to prevent. As in the past, the term 'damage' will require either significant financial losses under section 1030(e)(8)(A), or potential impact on medical treatment under section 1030(e)(8)(B) ... Under the bill, damages recoverable in civil actions by victims of computer abuse would be limited to economic losses for violations causing losses of $5,000 or more during any 1-year period. (emphasis added).

S.Rep. No. 104-357 seems to make clear that Congress intended the term "loss" to target remedial expenses borne by victims that could not properly be considered direct damage caused by a computer hacker. The term "loss" was not meant to

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except certain injuries from § 1030(e)(8)(A)'s damages threshold. [FN29] Indeed, S.Rep. No. 104-357's declaration that "If the loss to the victim meets the required monetary threshold, the conduct should be criminal, and the victim should be entitled to relief" (emphasis added), leaves no doubt but that "loss" under § 1030(g) remains subject to § 1030(e)(8)(A)'s $5,000 threshold. This reading is consistent with Congress' general intent to limit federal jurisdiction to cases of substantial computer crimes. [FN30]

FN29. Senator Patrick Leahy, a sponsor of the ECPA in 1984, recently introduced a bill, the Enhancement of Privacy and Public Safety in Cyberspace Act, S. 3083, 106th Cong. (2000), in the Senate that expressly seeks to clarify (1) what constitutes "loss," and (2) that "loss" is subject to the $5,000 monetary threshold. See Cong. Rec. S8823, 106th Cong. (Sep. 20, 2000). The relevant of provision of that bill, is completely consistent with S.Rep. No. 104-357's explanation of "loss." It states: "(10) the term 'loss' includes-- '(A) the reasonable costs to any victim of-- '(i) responding to the offense; '(ii) conducting a damage assessment; and '(iii) restoring the system and data to their condition prior to the offense; and '(B) any lost revenue or costs incurred by the victim as a result of interruption of service.';" Prior Senate Report, S. Rep No. 101-544 (1990), further supports this conclusion. It explained that the proposed private right of action, later codified as § 1030(g), "would create a civil cause of action for those who suffer violations of the Computer Fraud and Abuse Act. Plaintiffs would still have to meet the [then] $1,000 threshold ..." (emphasis added). It is noteworthy that the 1990 Report makes all injuries from CFAA "violations" subject to 1030(e)(8)(A)'s threshold, not just "damages." See also S.Rep. No. 99-432, at 2482-2483 ("the [Senate] Committee intends to make clear that losses caused by the same act may be aggregated for purposes of meeting the [then] $1,000 threshold.") (emphasis added); 132 Cong. Rec. S14453 (daily ed. Oct. 1, 1986) (statement of co- sponsor Sen. Trible) ("In addition, the concept of 'loss' embodied in this paragraph will not be limited solely to the cost of actual repairs. The Justice Department has suggested that other costs, including the cost of lost computer time necessitated while repairs are being made, be permitted to count toward the [then] $1,000 valuation. I and the other sponsors of this bill agree.").

FN30. Senator Laxalt, one of the CFAA's sponsors, explained that the monetary threshold was meant, "first, to distinguish between alterations that should fairly be treated as misdemeanors and those that should be treated as felonies; and second, to limit federal jurisdiction to the felonious alterations. Setting a specific loss value is one way to achieve this end ..." 132 Cong. Rec. S4072 (daily ed. Apr. 10, 1986) (statement of Sen. Laxalt regarding (a)(5)) (emphasis added); see also 132 Cong. Rec. S14453 (daily ed. Oct. 1, 1986) (statement of co- sponsor Sen. Trible) ("This bill will assert Federal jurisdiction over computer crimes only in those cases in which there is a compelling

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Federal interest. This reflects my belief and the Judiciary Committee's belief that the States can and should handle most such crimes, and that Federal jurisdiction in this area should be asserted narrowly."); see also Congr. Rec. S8823, 106th Cong. (Sep. 20, 2000) (Senator Leahy explaining that the damage threshold's purpose is to limit federal jurisdiction to major crimes).

Caselaw further supports the conclusion that all injuries under § 1030(g) are subject to § 1030(e)(8)'s $5,000 threshold, whether termed "damage" or "loss." In Letscher v. Swiss Bank Corp., 1996 WL 183019, 1996 U.S. Dist. LEXIS 4908 (S.D.N.Y. April 16, 1996), Judge Sand dismissed a former employee's claim that his employer violated the CFAA by allegedly procuring his personal credit report without authorization. Letscher claimed that Swiss Bank's violation "caused him to 'invest[ ] his time, money, and talent requesting reports, making telephone calls, and writing letters causing him emotional distress and anguish.' " Id. 1996 WL 183019 at *2. The "time, money, [ ] talent, and [efforts]" for which Letscher sought compensation were clearly "losses" to him, not compensation for "damage" to the integrity of his data or computer. Nevertheless, Judge Sand held that Letscher's losses were still subject to § 1030(e)(8)(A)'s $5,000 threshold and dismissed his claim finding that these losses were not "economic." Id.

In America Online, Inc. v. LCGM, 46 F.Supp.2d 444, 451 (E.D.Va.1998) , America Online, Inc. ("AOL") alleged that LCGM secretly collected AOL members' email addresses without AOL's authorization and then employed deceptive techniques to "spam" (i.e. to e-mail en masse) AOL members. The facts in AOL v. LCGM are quite similar to the hypothetical in S. Rep No. 101-544 that illustrated the difference between "loss" and "damage"--there was no "damage" to the function of AOL's system or the data within it, only plaintiff's "loss" from defendant's trespass. Nonetheless, the court required a finding that AOL's losses exceeded the "$5,000, the statutory threshold requirement" before it granted summary judgment. Id. at 450. Thus, it is clear that plaintiffs' alleged injuries, whether described as "damage" or "loss," are subject to § 1030(e)(8)(A)'s $5,000 threshold.

B. Plaintiffs fail to allege facts that could support a finding that their injuries meet § 1030(e)(8)(A)'s $5,000 threshold

Turning to the instant case, plaintiffs seek damages for their " 'loss'--an invasion of their privacy, a trespass to their personal property, and the misappropriation of confidential data by DoubleClick ... [as well the cost of the] affirmative steps [plaintiffs must take] to negate DoubleClick's wrongful unauthorized access of their computers." Plaintiffs' Opposition Brief at 23. They argue that in determining whether plaintiffs have met § 1030(e)(8)(A)' s $5,000 threshold, damages should be aggregated across all plaintiffs and all of DoubleClick's acts for any given year.

1. Damages and losses under § 1030(e)(8)(A) may only be aggregated across victims and time for a single act.

As a preliminary matter, we find that damages and losses under § 1030(e)(8)(A) may only be aggregated across victims and over time for a single act. The

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relevant clause states that "the term 'damage' means any impairment to the integrity or availability of data, a program, a system, or information that--(A) causes loss aggregating at least $5,000 in value during any 1-year period to one or more individuals." The fact that § 1030(e)(8)(A) is phrased in the singular ("any impairment to the integrity or availability of data, a program, a system, or information that--(a) causes loss"), rather than the plural (e.g., any impairments to the integrity or availability of data, programs, systems, or information that--(a) cause loss ... ), indicates that § 1030(e)(8)(A) should only apply to single acts. The legislative history clarifies that this was Congress' intent. The Senate Judiciary Committee's report that accompanied the CFAA, Sen. R. No. 99- 132, explains:

"The Committee does not intend that every victim of acts proscribed under [1030(e)(8)(A) ] must individually suffer a loss of [then] $1,000. Certain types of malicious mischief may cause smaller amounts of damage to numerous individuals, and thereby collectively create a loss of more than $1,000. By using 'one of more others', [FN31] the Committee intends to make clear that losses caused by the same act may be aggregated for the purposes of meeting the [then] $1,000 threshold." Id. at 5 (emphasis added).

FN31. The word "others" was replaced by "individuals" in the final bill.

This interpretation is consistent with Congress' overall intent to limit the CFAA to major crimes. See supra note 31. In contrast, plaintiffs cite no authority to support their reading of § 1030(e)(8)(A). Therefore, we find that § 1030(e)(8)(A) only allows aggregation of damage over victims and time for a single act.

2. Plaintiffs have failed to allege facts that could support a finding that plaintiffs suffered over $5,000 in damages and losses from any single act by DoubleClick.

In order to determine plaintiffs' damages and losses stemming from any single prohibited act by DoubleClick, we must first determine what constitutes a single act under § 1030(e)(8)(A). Examining § 1030(a)(2)(C), the relevant subsection, it is apparent that the definition of a prohibited act turns on the perpetrator's access to a particular computer. The prohibition is phrased in the singular: "[whoever] intentionally accesses a computer without authorization ... and thereby obtains ... (C) information from any protected computer ..." § 1030(a)(2)(C) (emphasis added). [FN32] Thus, the suggestion that DoubleClick's accessing of cookies on millions of plaintiffs' computers could constitute a single act is refuted by the statute's plain language. Nevertheless, the statute is ambiguous about the scope of a single prohibited act on any one computer. One could reasonably argue from § 1030(a)(2)(C)'s text that DoubleClick commits a violation each time it accesses a cookie on a plaintiff's hard drive. However, one could also plausibly maintain that DoubleClick's systematic uploading of data from a cookie on a particular computer's hard drive constitutes a single act of "access," even though it occurs over multiple electronic transactions. For the purposes of this motion, we need not choose between these two interpretations because even on the more liberal, plaintiffs fail to plead facts that could meet the damages threshold.

FN32. We recognize that statute covers information "from any protected

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computer," meaning that a single act could involve information from multiple computers. For example, if someone accessed a White House computer and through that computer erased information on State Department, Central Intelligence Agency, and FBI computers, the value of these damages and losses could be aggregated for the purposes of meeting § 1030(e)(8)(A)'s damages threshold. However, in the instant case, DoubleClick individually accessed each plaintiff's computer and obtained no information through it from other computers.

Plaintiffs essentially plead two bases of "damage or loss": (1) their cost in remedying their computers and data in the wake of DoubleClick's access, and (2) the economic value of their attention (to DoubleClick's advertisements) and demographic information. [FN33] Clearly, any economic losses plaintiffs bore in securing or remedying their systems in the wake of DoubleClick's alleged CFAA violations would count towards § 1030(e)(8)(A)'s damage threshold. See supra note 30 and accompanying text. However, as counsel demonstrated at oral argument, users may easily and at no cost prevent DoubleClick from collecting information by simply selecting options on their browsers or downloading an "opt-out" cookie from DoubleClick's Web site. See Transcript of February 22, 20001 Oral Argument at 15- 18. Similarly, they have not pled that DoubleClick caused any damage whatsoever to plaintiffs' computers, systems or data that could require economic remedy. Thus, these remedial economic losses are insignificant if, indeed, they exist at all.

FN33. Insofar as plaintiffs allege that they suffered emotional distress due to DoubleClick's "invasion of their privacy, [ ] trespass to their personal property, and [ ] misappropriation of confidential data," their injuries not actionable because only economic losses are recoverable under § 1030(g). See Letscher, 1996 WL 183019, at *2, 1996 U.S. Dist. LEXIS 4908, at *7; see also S. Rep No. 101-544 (1990) ("Damages [under § 1030(e)(8) (A) ] are limited to economic damages, except for violations of the medical records section, when pain and suffering damages would be permitted.")

Plaintiffs also contend that they have suffered economic damages consisting of the value of: (1) the opportunity to present plaintiffs with advertising; and (2) the demographic information DoubleClick has collected. See Transcript of February 22, 2001 Oral Argument at 47, 54. Essentially, they argue that because companies pay DoubleClick for plaintiffs' attention (to advertisements) and demographic information, the value of these services must, in some part, have rightfully belonged to plaintiffs. They point to AOL in which the court appeared to hold that damage to "reputation and goodwill" counted towards the damage threshold and argue that, by the same logic, the economic value of their attention and demographic information should count as well. See AOL, 46 F.Supp.2d at 451 .

Even assuming that the economic value of plaintiffs' attention and demographic information could be counted towards the monetary threshold--a dubious assumption [FN34]--it would still be insufficient. We do not commonly

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believe that the economic value of our attention is unjustly taken from us when we choose to watch a television show or read a newspaper with advertisements and we are unaware of any statute or caselaw that holds it is. We see no reason why Web site advertising should be treated any differently. A person who chooses to visit a Web page and is confronted by a targeted advertisement is no more deprived of his attention's economic value than are his off-line peers. Similarly, although demographic information is valued highly (as DoubleClick undoubtedly believed when it paid over one billion dollars for Abacus), the value of its collection has never been considered a economic loss to the subject. Demographic information is constantly collected on all consumers by marketers, mail-order catalogues and retailers. [FN35] However, we are unaware of any court that has held the value of this collected information constitutes damage to consumers or unjust enrichment to collectors. Therefore, it appears to us that plaintiffs have failed to state any facts that could support a finding of economic loss from DoubleClick's alleged violation of the CFAA.

FN34. AOL, 46 F.Supp.2d at 444, is unpersuasive on this point. Its reference to "reputation and goodwill" occurs in a one-line recitation of plaintiff's alleged bases for damages. The Virginia court offered no statutory, caselaw or legislative analysis to support its categorization of "reputation and goodwill" as economic damages in this context. In the absence of any discussion or authority to support its conclusion, AOL is unconvincing. In a broader sense, this type of damage seems far removed from the damage Congress sought to punish and remedy in the CFAA--namely, damage to computer systems and electronic information by hackers.

FN35. See, e.g., Jeff Sovern, Opting In. Opting Out, Or No Options At All: The Fight For Control Of Personal information, 74 Wash. L.Rev. 1033, 1036 (1999) ("The Direct Marketing Association, a trade association, estimates that more than 15,000 consumer mailing lists exist, containing some two billion names (including duplicates). More than 1000 commercial services are said to broker lists ... Internet sites, and even Westlaw, have databases designed to locate individuals and to report on their transactions--including their bankruptcy records, lawsuits, liens, real property refinancings, and transfers--and the location of their assets. Other Internet sites list driver's license and motor vehicle information, and verify Social Security numbers.") (citations omitted).

Nevertheless, to the extent that some value could be placed on these losses, we find that the plaintiffs have failed to allege facts that could support the inference that the damages and losses plaintiffs incurred from DoubleClick's access to any particular computer, over one year's time, could meet § 1030(e)(8)(A)'s damage threshold. Accordingly, Count III of the Amended Complaint is dismissed.

Conclusion Concerning Federal Claims

Plaintiffs' Amended Complaint fails to plead violations of any of the three

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federal statutes under which they bring suit. The absence of evidence in the legislative or judicial history of any of these Acts to suggest that Congress intended to prohibit conduct like DoubleClick's supports this conclusion. To the contrary, the histories of these statutes reveal specific Congressional goals--punishing destructive hacking, preventing wiretapping for criminal or tortious purposes, securing the operations of electronic communication service providers--that are carefully embodied in these criminal statutes and their corresponding civil rights of action.

Furthermore, DoubleClick's practices and consumers' privacy concerns with them are not unknown to Congress. Indeed, Congress is currently considering legislation that specifically recognizes and regulates the online harvesting of user information. For example, the "Consumer Internet Privacy Enhancement Act," H.R. 237, 107th Cong. (2001), now pending before a House Committee, imposes substantial notice and opt-out requirements on Web site operators who, unlike DoubleClick, compile personally identifiable information from users. See also, The Online Privacy protection Act of 2001, H.R. 89, 107th Cong. (2001); Electronic Privacy Protection Act, H.R. 112, 107th Cong. (2001); Social Security Online Privacy Protection Act, H.R. 91, 107th Cong. (2001); Consumer Privacy Protection Act, S. 2606, 106th Cong. (2000). [FN36] Although proposed legislation has no formal authoritative weight, it is evidence that Congress is aware of the conduct plaintiffs challenge and is sensitive to the privacy concerns it raises. Where Congress appears to have drawn the parameters of its regulation carefully and is actively engaged in the subject matter, we will not stray from its evident intent.

FN36. Interestingly, some of these proposals seem to make exceptions for conduct like DoubleClick's. For example, H.R. 237 does not impose these requirements on Web sites that harvest non-personally-identifiable information--a category into which DoubleClick falls--and H.R. 112 explicitly excepts "cookies" from its scope of regulated data-harvesting technologies. See § 2(e)(2)(B), H.R. 112, 107th Cong. (2001).

Counts IV--VII. Remaining State Claims

For the reasons set out above, we have dismissed plaintiffs' federal claims which were the sole predicate for federal jurisdiction. When federal claims are dismissed, retention of state law claims under supplemental jurisdiction is left to the discretion of the trial court. See 28 U.S.C. § 1367(c)(3)(1994)("[d]istrict courts may decline to exercise supplemental jurisdiction over a claim ... if ... (3) the district court has dismissed all claims over which it has original jurisdiction."); Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir.1994) ; In re Merrill Lynch Ltd. P'ships Litig., 7 F.Supp.2d 256, 258 (S.D.N.Y.1997). We decline to exercise supplemental jurisdiction over plaintiffs' state law claims. Accordingly, the remaining counts of plaintiffs' Amended Complaint are dismissed as well.

CONCLUSION

For the foregoing reasons, defendant's motion to dismiss is granted and plaintiffs' *527 Amended Complaint is dismissed with prejudice. [FN37]

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FN37. Because dismissal on the pleadings constitutes a "terminat [ion]" under 28 U.S.C. § 1407(a), the two cases transferred to this Court by the Judicial Panel on Multidistrict Litigation, Steinbeck v. DoubleClick, 00 Civ. 5705, C.A, N.O. 8:00-98 (C.D.Cal) and Freedman v. DoubleClick, 00 Civ. 7194, 2:00-1559 (E.D.La), need not be remanded. See Humphreys v. Tann, 487 F.2d 666 (6th Cir.1973), cert denied, 416 U.S. 956, 94 S.Ct. 1970, 40 L.Ed.2d 307 (1974); see also Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 37, 118 S.Ct. 956, 140 L.Ed.2d 62 ("To be sure ... the Panel is not meant to issue ceremonial remand orders in cases already concluded by summary judgment, say, or dismissal.").

IT IS SO ORDERED.

Bose v. Interclick, Inc.Not Reported in F.Supp.2d, 2011 WL 4343517 (S.D.N.Y. 2011)

MEMORANDUM AND ORDERDEBORAH A. BATTS, District Judge.

Plaintiff Sonal Bose (“Bose”), individually and on behalf of all others similarly situated, brings suit against Defendant Interclick, Inc. (“Interclick”), an Advertising Network company, and McDonald's USA LLC, McDonald's Corp., CBS Corp., Mazda Motor Corp. of America, Inc., Microsoft Corp., and Does 1–50 (collectively, the “Advertiser Defendants”) under the Computer Fraud and Abuse Act (“CFAA”), New York General Business Law Section 349, and New York State common law. All Defendants move to dismiss on the grounds that Plaintiff fails to allege cognizable injury or meet the $5,000.00 threshold to state a claim under the CFAA, and that Plaintiff's state law claims fail as a matter of law. For the reasons below, Defendants' Motions to Dismiss are GRANTED in part and DENIED in part.

I. BACKGROUNDThe facts and allegations are set forth in Bose's Amended Complaint

(“Am.Compl.”). Bose's factual assertions are assumed true for the purposes of this motion.

Bose is a resident of the city, county, and state of New York. (Am.Compl.¶ 7.) Bose is a consumer who frequently uses the Internet. (Id. ¶ 76.)

Interclick is an “Advertising Network” company. (Id. ¶¶ 8, 24.) Interclick purchases advertisement display space from websites, and displays advertisements of interest to a computer user. (Id. ¶ 30.) Websites on the Internet frequently display third-party advertisements. (Id. 130.) These websites sell advertising display space either directly to advertisers or to Advertising Network companies like Interclick. (Id. ¶¶ 24–25.) Interclick's clients are advertising companies and agencies that pay fees to Interclick to display their advertisements on websites within Interclick's advertising

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network. (Id. ¶¶ 21, 24.)Many Advertising Network companies use “browser cookies,” which are

text files that gather information about a computer user's internet habits. (Am.Compl.¶ 30.) Browser cookies contain unique identifiers and associate “browsing history information” with particular computers. (Id. ¶ 30.) Advertising Networks use this browsing history information to create “behavioral profiles.” When a computer user visits a web page on which the Advertising Network provides advertisements, the Advertising Network company uses a behavioral profile to select particular advertisements to display on that computer. (Id. ¶ 30.) Computer users can delete these browser cookies to prevent third parties from associating the user's browsing history information with their subsequent web activity. (Id. ¶¶ 32, 82.)

Bose, however, alleges that Interclick used “flash cookies” (or Local Shared Objects (“LSOs”)) to back up browser cookies. (Am.Compl.¶ 39.) When a computer user deletes a browser cookie, the flash cookie “respawns” the browser cookie without notice to or consent of the user. (Id. ¶ 39.) The flash cookie “may be” larger than a browser cookie. (Id. ¶ 88.) In October 2010, Bose examined her computer and found a flash cookie placed there from Interclick. (Id. ¶ 77.)

Bose also alleges that Interclick used “history sniffing” code invisible to the computer user. (Am.Compl.¶ 47.) This code, which contained a list of Web page hyperlinks, used the computer's browser to determine whether the computer had previously visited those hyperlinks, and transmitted the results to Interclick's servers. (Id. ¶ 47.) Interclick used data on the computer's browsing history to select particular advertisements to display on that computer. (Id. ¶ 47.)

On December 8, 2010, Bose filed suit against Interclick. A suit against the Advertiser Defendants followed on December 23, 2010, and those cases were consolidated with the filing of the First Amended Complaint on March 21, 2011. Plaintiff alleges that Interclick violated the CFAA by monitoring Plaintiff's web browsing. (Id. ¶ 1.) Bose alleges that the Defendants invaded her privacy, misappropriated personal information, and interfered with the operation of her computer. (Id. ¶ 3.) On April 18, 2011, all Defendants moved to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

II. DISCUSSION

****B. The Computer Fraud and Abuse Act

The CFAA provides, in pertinent part, “[w]hoever intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains information from any protected computer ... shall be punished.” 18 U.S.C. § 1030(a)(2)(C). Under § 1030(a)(5)(C), the CFAA also subjects to criminal liability someone who “intentionally accesses a protected computer without authorization, and as a result of such conduct, causes damage.”

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Although the CFAA is a criminal statute, it also provides a civil remedy. Under the civil enforcement provision of the CFAA, “[a]ny person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief .” 18 U.S.C. § 1030(g); see also Nexans Wires S.A. v. Sark–USA, Inc., 166 Fed. App'x 559, 562 (2d Cir. Feb.13, 2006) (recognizing that a Plaintiff can only bring a civil action if the Plaintiff satisfies one of five factors set forth in § 1030(c)(4)(A)(i)9). The relevant factor in this case is whether Defendants' conduct caused “loss to 1 or more persons during any 1–year period ... aggregating at least $5,000 in value.” § 1030(c)(4)(A) (i)(I).

1. Damage or Loss under the CFAAThe CFAA defines “damage” as “any impairment to the integrity or

availability of data, a program, a system, or information.” § 1030(e)(8). “Loss,” in turn, includes “any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.” § 1030(e)(11). In addition, any damage or loss must meet the $5,000.00 minimum statutory threshold specified in § 1030(c)(4)(A)(i)(I). Register.com, Inc. v. Verio, 356 F.3d 393, 439 (2d Cir.2004) (citing In re Double C lick Inc. Privacy Litiq., 154 F.Supp.2d 497, 520–23 (S.D.N.Y.2001)).

Here, Bose pleads three types of damage or loss: (1) damage due to impairment of Bose's computer and computer-related services and 9 The five factors set forth in 18 U.S.C. § 1030(c)(4)(A)(i) are:

(I) loss to 1 or more persons during any 1–year period (and, for purposes of an investigation, prosecution, or other proceeding brought by the United States only, loss resulting from a related course of conduct affecting 1 or more other protected computers) aggregating at least $5,000.00 in value;

(II) the modification or impairment, or potential modification or impairment, of the medical examination, diagnosis, treatment, or care of 1 or more individuals;

(III) physical injury to any person;

(IV) a threat to public health or safety; and

(V) damage affecting a computer used by or for an entity of the United States Government in furtherance of the administration of justice, national defense, or national security.

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resources; (2) loss due to Interdict's collection of personal information from Bose; and (3) loss due to an interruption of Bose's Internet service. (Am.Compl.¶¶ 94–116.)

a. Damage to Computer–Related ResourcesWith regard to damage or impairment of a computer system, physical

damage to a computer is not necessary to allege damage or loss. EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577, 585 (1st Cir.2001) (noting that instances of physical damage to computers are likely to become less common while the value and cost of maintaining computer security are increasing); see also Tyco Int'l (US) Inc. v. John Does 1–3, No. 01 Civ. 3856, 2003 WL 21638205, at *1 (S.D.N.Y. July 11, 2003). Any loss incurred from “securing or remedying” a computer system after an alleged CFAA violation still constitutes loss. In re Double Click Inc. Privacy Litig., 154 F.Supp.2d 497, 524 (S.D.N.Y.2001) ( “S.Rep. No. 104–357 seems to make clear that Congress intended the term ‘loss' to target remedial expenses borne by victims that could not properly be considered direct damage caused by a computer hacker.”). Accordingly, Courts have sustained claims where a Defendant accessed a Plaintiff's computer system in order to copy the Plaintiff's system for the Defendant's own competitor computer system. I.M.S. Inquiry Mgmt. Sys., Ltd. v. Berkshire Info., 307 F.Supp.2d 521, 525 (S.D.N.Y.2004) (finding that harm to the integrity of plaintiff's data system constitutes loss).

Courts have found that losses include the costs of seeking to “identify evidence of the breach, assess any damage it may have caused, and determine whether any remedial measures were needed to rescue the network.” Univ. Sports Pub. Co. v. Playmakers Media Co., 725 F.Supp.2d 378, 388 (S.D.N.Y.2010); see also Ipreo Holdings LLC v. Thomson Reuters Corp., No. 09 CV 8099(BSJ), 2011 WL 855872, *7 (S.D.N.Y. Mar.8, 2011) (holding that a Plaintiff can meet the loss requirement through “damage assessment and/or remedial measures, even without pleading actual damage”); Kaufman v. Nest Seekers, LLC, No. 05 CV 6782(GBD), 2006 WL 2807177, at *8 (S.D.N.Y. Sept.26, 2006) (denying motion to dismiss because “costs involved in investigating the damage to [a] computer system may constitute ... loss”); see also I.M.S. Inquiry Mgmt. Sys., Ltd., 307 F.Supp.2d 521 at 526 (holding that a Plaintiff sufficiently alleged loss where Defendant's unauthorized activity “forced Plaintiff to incur costs of more than $5,000 in damage assessment and remedial measures”).

Here, Bose fails to quantify any damage that Interclick caused to her “computers, systems or data that could require economic remedy.” See In re DoubleClick Inc. Privacy Litig., 154 F.Supp.2d at 521. Bose alleges that Interclick impaired the functioning and diminished the value of Bose's computer in a general fashion (See Am. Compl. ¶ 115), but fails to make any specific allegation as to the cost of repairing or investigating the alleged damage to her computer. See Fink v. Time Warner Cable, No. 08 Civ. 9628(LTS)(KNF), 2009 WL 2207920, *4 (S.D.N.Y. July 23, 2009) (dismissing a

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CFAA claim because Plaintiff only alleged that Defendant caused damage by “impairing the integrity or availability of data and information,” which was “insufficiently factual to frame plausibly the damages element of Plaintiff's CFAA claim”); see also Czech v. Wall St. on Demand, Inc., 674 F.Supp.2d 1102, 1118 (D.Minn.2009) (holding that a Plaintiff's claim that unwanted text messages “caused the wireless devices of [Plaintiff] to slow and/or lag in operation” and “impair[ ] the availability of and interrupt[ ] the wireless-device service,” was conclusory). Bose's claims therefore fail because she does not quantify the repair cost or cost associated with investigating the alleged damage.

b. Collection of Personal InformationBose's allegations concerning “invasion of [her] privacy,” “trespass,” and

“misappropriation of confidential data” are also not cognizable economic losses. See In re Double C lick Inc. Privacy Litig., 154 F.Supp.2d at 524 n. 33; see also S. Rep No. 101–544 (1990) (noting that the CFAA is limited to “economic damages,” except for violations related to medical records).

Only economic damages or loss can be used to meet the $5,000.00 threshold. In re DoubleClick Inc. Privacy Litig., 154 F.Supp.2d at 519 (holding that computer users' demographic information were not compensable “economic damages”); see also Civic Ctr. Motors, Ltd. v. Mason St. Imp. Cars, Ltd., 387 F.Supp.2d 378, 382 (S.D.N.Y.2005) (holding that lost profits from defendant's unfair competitive edge were not economic damages under the CFAA). The limit based on economic damages under the CFAA “precludes damages for death, personal injury, mental distress, and the like.” Creative Computing v. Getloaded.com LLC, 386 F.3d 930, 935 (9th Cir.2004).

Here, Bose alleges loss from Interclick's collection of her personal information without her permission through flash cookies and history sniffing code. (Am.Compl.¶¶ 94–109.) Unlike in DoubleClick, where Plaintiffs could “easily and at no cost prevent [the Defendant] from collecting information by simply selecting options on their browsers or downloading an ‘opt out’ cookie,” Bose alleges that Interclick circumvented “browser privacy controls” without her consent. (Am.Compl.¶ 79); see 154 F.Supp.2d at 521.

This Court is not persuaded by Plaintiff's attempt to distinguish DoubleClick. In LaCourt v. Specific Media, Inc., a court in the Central District of California dismissed a CFAA claim by plaintiffs who alleged that they set “privacy and security controls” on their computers to block and delete third party cookies, and that the defendant had a “Flash cookie” installed on plaintiffs' computers without notice or consent. See LaCourt v. Specific Media, Inc., No. SACV 10–1256–GW(JCGx), 2011 WL 1661532, at *1 (C.D.Cal. Apr. 28, 2011). Finding that plaintiffs had failed to allege economic injury, the court noted,

the Complaint does not identify a single individual who was foreclosed from entering into a ‘value-for-value exchange’ as a result of [defendant's] alleged conduct. Furthermore, there are no facts in the [complaint] that

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indicate that the Plaintiffs themselves ascribed an economic value to their unspecified personal information. Finally, even assuming an opportunity to engage in a ‘value-for-value exchange,’ Plaintiffs do not explain how they were ‘deprived’ of the economic value of their personal information simply because their unspecified personal information was purportedly collected by a third party.

LaCourt, 2011 WL 1661532, at *5.

The deficiencies noted by the court in LaCourt are also present here.Furthermore, as noted by the court in DoubleClick, personal data and

demographic information concerning consumers are constantly collected by marketers, mail-order catalogues and retailers. In re DoubleClick Inc. Privacy Litiq., 154 F.Supp.2d at 525. The collection of demographic information does not “constitute[ ] damage to consumers or unjust enrichment to collectors.” Id. Advertising on the Internet is no different from advertising on television or in newspapers. Id. Even if Bose took steps to prevent the data collection, her injury is still insufficient to meet the statutory threshold. See LaCourt, 2011 WL 1661532, at *5 (holding that a Plaintiff's inability to delete or control cookies may constitute de minimis injury, but such injury was still insufficient to meet the $5,000.00 threshold).

The court's reasoning in DoubleClick is still persuasive, as the court concluded in LaCourt:

While Plaintiffs attempt to distinguish DoubleClick on the ground they have alleged that they were deprived not of “mere demographic information,” but “of the value of their personal data,” it is not clear what they mean by this. Defendant observes that, if anything, the Plaintiffs in DoubleClick alleged that the Defendant collected much more information than Specific Media supposedly collected in this case, including “names, e-mail addresses, home and business addresses, telephone numbers, searches performed on the Internet, Web pages or sites visited on the Internet and other communications and information that users would not ordinarily expect advertisers to be able to collect.”

Id. (citing In re Double C lick Inc. Privacy Litig., 154 F.Supp.2d at 503).Bose's claim that Interclick collected her personal information therefore

does not constitute cognizable loss sufficient to meet the $5,000.00 statutory threshold.

c. Interruption of Service.Bose also fails to allege specific damage or loss incurred due to alleged

interruption of service, or costs incurred to remedy the alleged interruption of service. (Am.Compl.¶ 111–116.) Even if a flash cookie may reach up to 100 kilobytes in size and may occupy space on Bose's hard drive, Bose fails to demonstrate that the flash cookie caused damage, a slowdown, or a shutdown to her computer. See Czech, 674 F.Supp.2d at 1117 (holding that

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damage caused by an “impairment of performance” of a cell phone occurs only when the “cumulative impact of all calls or messages at any given time exceeds the device's finite capacity so as to result in a slowdown, if not an outright ‘shutdown,’ of service”). Thus, Bose's claim of interruption of service is insufficient to meet the $5,000.00 statutory threshold for loss.

2. AggregationBose alleges that when her claims and other class members' claims are

aggregated, the $5,000.00 threshold is met. (Am.Compl.¶¶ 120, 150.)The Second Circuit has not yet addressed whether losses can be

aggregated for purposes of the CFAA before a class is certified, but it has indicated approval of DoubleClick 's thorough exploration of the CFAA. Register.com, Inc., 356 F.3d at 439–440 (noting in DoubleClick “excellent statutory construction analysis and thorough exploration of legislative history”). In DoubleClick, the court concluded that damage and loss may only be “aggregated across victims and over time” for a “single act.” 154 F.Supp.2d at 523 (declining to aggregate claims that defendant placed cookies on multiple computers and noting that the CFAA defines damage in § 1030(e)(8) in the singular form, “any impairment to the integrity or availability of data, a program, a system, or information,” rather than the plural form, “any impairments to the integrity or availability of data, programs, systems, or information”); see also S.Rep. No. 99–132, at 5 (1986) (explaining that loss caused by the “same act” can be aggregated to meet the $5,000.00 threshold). Plaintiff's claims that Interclick placed cookies on multiple computers could not be aggregated to reach the $5,000.00 threshold under the reasoning in DoubleClick.

Moreover, even if a plaintiff represents a class, she must still demonstrate that she herself has been personally injured. Lewis v. Casey, 518 U.S. 343, 357, 116 S.Ct. 2174, 135 L.Ed.2d 606 (1996); see also In re America Online, Inc., 168 F.Supp.2d 1359, 1374–75 (S.D.Fla.2001) (dismissing a CFAA claim even if damages can be aggregated across multiple computers because Plaintiff failed to specify individuals who suffered the loss, whether they were individuals within the class, outside the class or named representatives).

Some courts in the Ninth Circuit have concluded that damages can be aggregated across multiple computers. The court in In re Toys R Us, Inc., Privacy Litig., explained aggregation: “Certain types of malicious mischief may cause smaller amounts of damage to numerous individuals, and thereby collectively create a loss of more than $1,000.” No. 00 Civ. 2746, 2001 WL 34517252, at *11 n. 20 (N.D.Cal. Oct.9, 2001) (quoting Sen. Rep. No. 99–132). The court concluded that because the committee referred to “numerous individuals,” damages across multiple computers could be aggregated. Id. (holding that when “Defendants caused an identical file to be implanted in each of the Plaintiffs' computers, resulting in damages of a uniform nature,” Plaintiffs could aggregate “damages exceeding $5,000 during any one-year period to one or more individuals”). Under this reasoning, multiple intrusions across a one-year period can cause a single

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impairment to data, and the statute does not limit impairment to the result of a single intrusion or a single corrupted byte. Creative Computing, 386 F.3d at 934–35.

Nevertheless, courts within the Ninth Circuit to have considered the question subsequently have raised doubts concerning whether even after aggregation, Plaintiffs can meet the $5,000.00 threshold when they allege damages similar to those alleged in this case. See LaCourt, 2011 WL 1661532, *6 (finding that Plaintiffs “failed to plausibly allege that they and the putative class—even in the aggregate—have suffered $5,000 in economic damages in a one year period as a result of [the Defendant's] actions”). As in LaCourt, Plaintiff here has failed to allege facts that would allow this Court to conclude that damages meet the $5,000.00 threshold, even when aggregated across the putative class.

Accordingly, Bose's Amended Complaint must be dismissed because she failed to assert personal economic loss under the CFAA.

C. State Law ClaimsPlaintiff claims that this Court has jurisdiction over the remaining state

law claims under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332 (hereinafter, “CAFA”), because the aggregate claims of Plaintiff and the proposed Class exceed $5,000,000.00, there is minimal diversity of citizenship between Defendants and the proposed Class, and the Classes each consist of more than one hundred members. (Am.Compl.¶ 16.) Defendants move to dismiss the state law claims on the grounds that Plaintiff has failed to meet the $5,000,000.00 threshold, and that Plaintiff has failed to state a claim under the relevant state laws.

As an initial matter, this Court notes that Plaintiff's failure to meet the $5,000.00 threshold under the CFAA is not, as Defendants argue, necessarily fatal to Bose's attempt to assert CAFA jurisdiction over her state law claims. Damages under the CFAA are narrowly defined, and Plaintiff and the Class Members may be entitled to damages under state law that are not cognizable under the CFAA. This Court must therefore address Plaintiff's state law claims.

i. New York General Business Law § 349Plaintiff alleges that Defendants' information collecting activities

constitute a deceptive business act or practice under Section 349 of the New York General Business law. (Am.Compl.¶ 155.) Section 349 was originally enacted as a broad consumer protection measure. See Stutman v. Chemical Bank, 95 N.Y.2d 24, 28, 709 N.Y.S.2d 892, 731 N.E.2d 608 (N.Y.2000); N.Y. Gen. Bus. Law. § 349 (McKinney 2011). To state a claim under Section 349, a plaintiff must demonstrate three elements: “first, that the challenged act or practice was consumer-oriented; second, that it was misleading in a material way; and third, that the plaintiff suffered injury as a result of the deceptive act.” Id. at 29, 709 N.Y.S.2d 892, 731 N.E.2d 608; see also Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 25, 623

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N.Y.S.2d 529, 647 N.E.2d 741 (N.Y.1995). The deceptive practice must be “likely to mislead a reasonable consumer acting reasonably under the circumstances.” Oswego, 85 N.Y.2d at 26, 623 N.Y.S.2d 529, 647 N.E.2d 741. “The phrase deceptive acts or practices” under the statute is not the mere invention of a scheme or marketing strategy, but the actual misrepresentation or omission to a consumer.” Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 325, 746 N.Y.S.2d 858, 774 N.E.2d 1190 (N.Y.2002). In addition, a plaintiff must prove “actual” injury to recover under the statute, though not necessarily pecuniary harm. Oswego, 85 N.Y.2d at 26, 623 N.Y.S.2d 529, 647 N.E.2d 741.

Plaintiff alleges that Defendant Interclick used LSOs and browser history sniffing code to circumvent consumers' ordinary browser privacy and security settings on their computers. (Am.Compl.¶ 156.) This conduct misled consumers into believing their digital information was private when in reality it was being tracked without their knowledge. (Am.Compl.¶ 157.) Plaintiff alleges that consumers were harmed in that they suffered “the loss of privacy through the exposure of the [sic] personal and private information and evasion of privacy controls on their computers.” (Am.Compl.¶ 160.)

Interclick first argues that Plaintiff cannot meet the second element of a claim under Section 349 because Plaintiff has failed to allege misleading conduct on the part of Interclick. Interclick argues that as Plaintiff was unaware of Interclick's actions while they were occurring, Plaintiff could not have been misled into entering into any consumer transaction. (Interclick Mem. L., p. 18.) Interclick would thus have this Court interpose a reliance element into the Section 349 analysis. The New York Court of Appeals has specifically rejected that proposition. See Stutman, 95 N.Y.2d at 30, 709 N.Y.S.2d 892, 731 N.E.2d 608 (“Plaintiffs need not additionally allege that they would not otherwise have entered into the transaction.”)

In its reply papers, Interclick modifies its argument slightly, contending that Plaintiff fails to allege any misrepresentation or omission by Interclick to Plaintiff. (Interclick Rep. Mem. L., at 8 .) Although the paradigmatic case under Section 349 involves a business making a false or misleading statement in advertising aimed at consumers, see, e.g., Waldman v. New Chapter, Inc., 714 F.Supp.2d 398, 405 (E.D.N.Y.2010), courts have allowed claims under Section 349 where misleading statements are made to third parties resulting in harm to consumers. See Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 264 (2d Cir.1995) (finding false statements by a competitor to a regulatory agency actionable under Section 349); Kuklachev v. Gelfman, 600 F.Supp.2d 437, 476 (E.D.N.Y.2009) (“The relevant question ‘is whether the matter affects the public interest in New York, not whether the suit is brought by a consumer.’ ”) (quoting Securitron, 65 F.3d at 257). A claim under Section 349 need not, as Interclick argues, involve an allegation of a deceptive statement made by Interclick to Plaintiff. It need only allege that Interclick engaged in a deceptive practice that affected the consuming public. Plaintiff has alleged as much.

Interclick next claims that Plaintiff has failed to allege any injury as a

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result of any misleading act or omission. To state a claim under Section 349, a plaintiff must allege “actual” injury, though not necessarily pecuniary injury. Stutman, 95 N.Y.2d at 29, 709 N.Y.S.2d 892, 731 N.E.2d 608. Although collection of personal information does not constitute “economic” injury for purposes of the CFAA, courts have recognized similar privacy violations as injuries for purposes of Section 349. See Meyerson v. Prime Realty Services, LLC, 7 Misc.3d 911, 920, 796 N.Y.S.2d 848 (N.Y.Sup.Ct.2005) (“[I]t cannot be doubted that a privacy invasion claim—and an accompanying request for attorney's fees-may be stated under [Section] 349 based on nonpecuniary injury ...”); Anonymous v. CVS Corp., 728 N.Y.2d 333, 340 (N.Y.Sup.Ct.2001) (allowing Section 349 claim for violation of privacy when local pharmacy transferred prescription records to a national chain without advance notice to consumers).

Plaintiff has therefore adequately pled a claim under Section 349 with respect to Defendant Interclick. Nevertheless, Plaintiff has not alleged any facts demonstrating that the Advertiser Defendants were involved in any of the allegedly deceptive conduct. Therefore, Defendant Interclick's Motion to Dismiss as to Plaintiff's Section 349 claim is DENIED, and the Advertiser Defendants' Motion to Dismiss the Section 349 claim is GRANTED.

ii. Trespass to ChattelsPlaintiff appears to allege two potential grounds for a trespass to chattels

claim: first, that Defendants' have dispossessed Plaintiff and the other Class Members of the economic value of their personal information, and second, that Defendants' impaired the value of Plaintiff's and the other Class Members' computers by installing Flash LSOs and browser history sniffing code on those computers. (Am.Compl.¶¶ 168–170.)

A trespass to chattels occurs when a party intentionally, and without justification or consent, physically interferes with the use and enjoyment of personal property in another's possession, and thereby harms that personal property. In re JetBlue Airways Corp. Litig., 379 F.Supp.2d 299, 327 (E.D.N.Y.2005); see also Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 404 (2d Cir.2004). Nevertheless, “one who intentionally interferes with another's chattel is liable only if the interference results in harm to ‘the [owner's] materially valuable interest in the physical condition, quality, or value of the chattel, or if the [owner] is deprived of the use of the chattel for a substantial time.’ “ School of Visual Arts v. Kuprewicz, 3 Misc.3d 278, 771 N.Y.S.2d 804, 807–08 (N .Y.Sup.Ct.2003) (citing Restatement 2d of Torts § 218, Comment e .)

Although Plaintiff's claim that she was dispossessed of the economic value of her personal information is of dubious merit, see discussion of CFAA claim, supra; JetBlue, 379 F.Supp.2d at 328–329, Plaintiff's trespass to chattels claim regarding Interclick's placement of unauthorized Flash LSOs and history-sniffing code, considering there is no allegation that the devices materially affected the condition, quality, or value of the computer, is arguably sufficient to survive a motion to dismiss. School of Visual Arts v.

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Kuprewicz, 3 Misc.3d 278, 771 N.Y.S.2d 804, 808 (N.Y.Sup.Ct.2003) (sustaining trespass to chattels claim where plaintiff alleged that unsolicited emails “deplete hard disk space, drained processing power, and adversely affected other system resources”).

Plaintiff's claim with respect to Interclick thus survives. Again, however, Plaintiff has not alleged any facts indicating that the Advertiser Defendants committed a trespass. Accordingly, Defendant Interclick's Motion to Dismiss as to Plaintiff's trespass to chattels claim is DENIED, and the Advertiser Defendants' Motion to Dismiss the trespass to chattels claim is GRANTED.

iii. Breach of Implied ContractIn order to recover for breach of implied contract or quasi-contract under

New York law, a plaintiff must establish: “(1) the performance of services in good faith, (2) the acceptance of the services by the person to whom they are rendered, (3) an expectation of compensation therefore, and (4) the reasonable value of the services.” Mid–Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d 168, 175 (2d Cir.2005) (internal quotations and citations omitted).

Plaintiff describes the implied contractual relationship as follows: “Plaintiff and Class Members provided their personal information in good faith to websites (publishers), reasonably expected that such information would be exchanged with the advertisers and that Plaintiff and Class Members would in turn receive the goods and services offered by such websites” [sic]. (Am.Compl. ¶ 183.) Under this theory of implied contract, Plaintiff fails to allege that this bargain was unfulfilled in any way. She does not allege that she or the Class Members were denied the benefit for which they had “bargained,” i.e., receiving the goods and services offered by the websites to whom they offered their personal information.

Therefore, Defendants' 12(b)(6) Motions to Dismiss Plaintiff's breach of implied contract claim are GRANTED.

iv. Tortious Interference with ContractPlaintiff further alleges that when she visited websites on which Interclick

operated, she entered into agreements with the operators of those websites, including privacy policies and terms of service. Plaintiff alleges that Defendants' activities were in conflict with the privacy policies and caused the websites to breach those policies, therefore constituting a tortious interference with contract.

The elements of a tortious interference claim are: (1) that a valid contract exists; (2) that a “third party” had knowledge of the contract; (3) that the third party intentionally and improperly procured the breach of the contract; and (4) that the breach resulted in damage to the plaintiff. See TVT Records v. Island Def Jam Music Group, 412 F.3d 82, 88 (2d Cir.2005); Finley v. Giacobbe, 79 F.3d 1285, 1294 (2d Cir.1996).

Plaintiff has not stated a claim for tortious interference with contract because she has not alleged any facts regarding the nature of the privacy

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agreements that she had with any of the websites. Furthermore, Plaintiff does not specify any individual contract that was breached, but just claims generally that Plaintiff had contracts with various website operators which were all breached. (Am.Compl.¶ 194.) Plaintiff's allegations are far too general to state a claim for tortious interference with contract, because without facts regarding the terms of the contracts or the specific parties to the contracts, it cannot be determined if a contract indeed existed or if Defendants' activities procured a breach of those contracts.

Therefore, Defendants' 12(b)(6) Motions to Dismiss as to Plaintiff's tortious interference with contract claim are GRANTED.

D. Leave to RepleadWhen a complaint has been dismissed, permission to amend it “shall be

freely given when justice so requires.” Fed.R.Civ.P. 15(a). However, a court may dismiss without leave to amend when amendment would be “futile,” or would not survive a motion to dismiss. Gatt Communications, Inc. v. PMC Associates, 10–CV–8, 2011 WL 1044898 at *7 (S.D.N.Y. Mar.10, 2011) (citing Oneida Indian Nation of N.Y. v. City of Sherrill, 337 F.3d 139, 168 (2d Cir.2003).

Here, Plaintiff has alleged no specific interaction with any of the Advertiser Defendants, nor has she alleged any knowledge or active participation by the Advertiser Defendants in Interclick's alleged unauthorized access to the computers of Plaintiff and the Class Members. Plaintiff's claims against the Advertiser Defendant are futile and would not survive a motion to dismiss. Those claims are therefore dismissed, with prejudice.

Furthermore, as Plaintiff cannot meet the requisite statutory threshold under CFAA or state the necessary contractual relationships for a Breach of Implied Contract or Tortious Interference with Contract claim, those claims are dismissed, with prejudice.

III. CONCLUSIONFor the above reasons, the Advertiser Defendants' Motion to Dismiss is

GRANTED and Plaintiff's claims against McDonald's Corporation, CBS Corporation, Mazda Motor of America, Inc., Microsoft Corporation, and McDonald's USA, LLC, are dismissed with prejudice;

Interclick's Motion to Dismiss is GRANTED with respect to Plaintiff's CFAA claim. Plaintiff's Breach of Implied Contract Claim, and Plaintiff's Tortious Interference with Contract claim, and those claims are dismissed with prejudice;

Interclick's Motion to Dismiss is DENIED with respect to Plaintiff's claim under New York General Business Law Section 349, and Plaintiff's Trespass to Chattels claim; and

Defendant Interclick shall answer the remaining claims within 30 days of the date of this Order.

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SO ORDERED.

Dougherty v. Salt125 N.E. 94 (1919)

 Cardozo, J. 

The plaintiff, a boy of eight years, received from his aunt, the defendant's testatrix, a promissory note for $3,000, payable at her death or before. Use was made of a printed form, which contains the words ‘value received.’ How the note came to be given was explained by the boy's guardian, who was a witness for his ward. The aunt was visiting her nephew. 

‘When she saw Charley coming in, she said, ‘Isn't he a nice boy?’ I answered her, Yes; that he is getting along very nice, and getting along nice in school; and I showed where he had progressed in school, having good reports, and so forth, and she told me that she was going to take care of that child; that she loved him very much. I said, ‘I know you do, Tillie, but your taking care of the child will be done probably like your brother and sister done, take it out in talk. ’She said, ‘I don't intend to take it out in talk; I would like to take care of him now. ’I said, ‘Well, that is up to you.’ She said, ‘Why can't I make out a note to him? ’I said, ‘You can, if you wish to.’ She said, ‘Would that be right?’ And I said, ‘I do not know, but I guess it would; I do not know why it would not.’ And she said, ‘Well, will you make out a note for me?’ I said, ‘Yes, if you wish me to,’ and she said, ‘Well, I wish you would.”

Did Aunt Tillie intend to make a legally binding promise to Charley? (a) Yes (b) No

 A blank was then produced, filled out, and signed. The aunt handed the note

to her nephew, with these words:         

‘You have always done for me, and I have signed this note for you. Now, do not lose it. Some day it will be valuable.’

 The trial judge submitted to the jury the question whether there was any

consideration for the promised payment. Afterwards, he set aside the verdict in favor of the plaintiff, and dismissed the complaint. The Appellate Division, by a divided court, reversed the judgment of dismissal, and reinstated the verdict on the ground that the note was sufficient evidence of consideration. 

We reach a different conclusion. The inference of consideration to be drawn from the form of the note has been so overcome and rebutted as to leave no question for a jury. This is not a case where witnesses, summoned by the defendant and friendly to the defendant's cause, supply the testimony in disproof of value.  Strickland v. Henry, 175 N. Y. 372, 67 N. E. 611. This is a case where the testimony in disproof of value comes from the plaintiff's own witness, speaking at the

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plaintiff's instance. The transaction thus revealed admits of one interpretation, and one only. The note was the voluntary and unenforceable promise of an executory gift. Harris v. Clark, 3 N. Y. 93, 51 Am. Dec. 352; Holmes v. Roper, 141 N. Y. 64, 66,36 N. E. 180. This child of eight was not a creditor, nor dealt with as one. The aunt was not paying a debt.  She was conferring a bounty.  Fink v. Cox, 18 Johns. 145, 9 Am. Dec. 191.

If Aunt Tillie had been making a promise to pay a debt, she would have (a) been making the promise in return for value received. (b) not have been making the promise in return for value received.

 The promise was neither offered nor accepted with any other purpose. . . . A note so given is not made for ‘value received,’ however its maker may have labeled it. The formula of the printed blank becomes, in the light of the conceded facts, a mere erroneous conclusion, which cannot overcome the inconsistent conclusion of the law.  . . .  The plaintiff through his own witness, has explained the genesis of the promise, and consideration has been disproved. Neg. Instr. Law, § 54 (Consol. Laws, c. 38). We hold, therefore, that the verdict of the jury was contrary to law, and that the trial judge was right in setting it aside. . . .

The court requires that Aunt Tillie’s promise to pay the money be given in exchange for value received.  Thus, without such an exchange, the fact that Aunt Tillie intended the promise to be legally enforceable is irrelevant to the question of whether the promise is in fact legally enforceable. (a) True (b) False

 The judgment of the Appellate Division should be reversed, and the judgment

of the Trial Term modified by granting a new trial, and, as modified, affirmed, with costs in all courts to abide the event.

United States District Court, D. Nevada

In Re Zappos.Com, Inc., Customer Data Security Breach Litigation,

3:12-CV-00325-RCJ-VPCSeptember 27, 2012.

OrderR. JONES, District Judge

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This Multidistrict Litigation ("MDL") proceeding arises out of a security breach of servers belong to Defendants Amazon.com, Inc. zon")[fn1] , doing business as Zappos.com, and Zappos.com, Inc. ("Ama: ("Zappos") in January 2012. Now pending is Defendant Zappos' Motion to Compel Arbitration and Stay action (#3).

I. Relevant Factual Background

Zappos is an online retailer of apparel, shoes, handbags, home furnishing, beauty products, and accessories. (Rajan Decl. ¶ 3 (#3-1).) Plaintiffs are Zappos customers who gave personal information to Zappos in order to purchase goods via Zappos.com and/or 6PM.com. (Id. ¶¶ 4-7; Rajan Second Supp'l Decl. ¶ 3-13 (#13-1).) In mid-January 2012, a computer hacker attacked Zappos.com and attempted to download files containing customer information such as names and addresses from a Zappos server (the "Security Breach"). (Defs.' Mot. Compel at 1 (#3); Pls.' Opp'n at 4 (#10) .) Plaintiffs allege that on January 16, 2012, Zappos notified Plaintiffs via email that their personal customer account information had been compromised by hackers. (Def.'s Mot. Compel at 6 (#3); Steven Pls.' Opp'n at 1 (#9); Pls.' Opp'n at 4 (#10).) Plaintiffs have filed complaints in federal district courts across the country seeking relief pursuant to state and federal statutory and common law for damages resulting from the Security Breach.

II. Procedural Background

On June 14, 2012, the United States Judicial Panel on Multidistrict Litigation (the "MDL Panel") transferred nine pending actions[fn2] to the District of Nevada for coordinated or consolidated pretrial proceedings. (Transfer Order (#1).) On July 16, 2012, the MDL Panel transferred an additional case into this action.[fn3] Also on June 14, 2012, Defendants' Motion to Compel Arbitration and Stay Action (#3) was filed in this Court.[fn4] On August 30, 2012, Plaintiffs Theresa D. Stevens, Stacy Penson, Tara J. Elliot, Brooke C. Brown, and Christa Seal (the "Stevens Plaintiffs") filed their Opposition (#9). Plaintiffs Stephanie Priera, Patti Hasner, Robert Ree, Shari Simon, and Kathryn Vorhoff (the "Priera Plaintiffs") also filed their Opposition (#10) on August 30, 2012. Plaintiffs Dahlia Habashy and Josh Richards each submitted their respective Joinder (##11, 12) to the Priera Opposition (#10) on August 30, 2012. Defendants submitted a Joinder of Additional Plaintiffs (#14) to their Motion to Compel Arbitration and Stay Action (#3) on August 30, 2012. Defendants filed their Reply (#16) on September 6, 2012. The Court held a hearing on the motion and heard the parties' oral arguments on September 19, 2012.

III. Legal Standard

The Federal Arbitration Act ("FAA") provides that contractual arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2 . . .

IV. Discussion

The arbitration agreement at issue, founds in the Disputes section of the Terms of Use of the Zappos.com website, provides as follows:

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Any dispute relating in any way to your visit to the Site or to the products you purchase through the Site shall be submitted to confidential arbitration in Las Vegas, Nevada, except that to the extent you have in any manner violated or threatened to violate our intellectual property rights, we may seek injunctive or other appropriate relief in any state or federal court in the State of Nevada. You hereby consent to, and waive all defense of lack of personal jurisdiction and forum non conveniens with respect to venue and jurisdiction in the state and federal courts of Nevada. Arbitration under these Terms of Use shall be conducted pursuant to the Commercial Arbitration Rules then prevailing at the American Arbitration Association. The arbitrator's award shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. To the fullest extent permitted by applicable law, no arbitration under this Agreement shall be joined to an arbitration involving any other party subject to this Agreement, whether through class action proceedings or otherwise. You agree that regardless of any statute or law to the contrary, any claim or cause of action arising out of, related to or connected with the use of the Site or this Agreement must be filed within one (1) year after such claim or cause of action arose or be forever banned.

(Carton Decl. Ex. 8 (#10-16).) Additionally, the first paragraph of the Terms of Use provides in relevant part: "We reserve the right to change this Site and these terms and conditions at any time. ACCESSING, BROWSING OR OTHERWISE USING THE SITE INDICATES YOUR AGREEMENT TOALL THE TERMS AND CONDITIONS IN THIS AGREEMENT, SO PLEASE READ THISAGREEMENT CAREFULLY BEFORE PROCEEDING." (Id. (emphasis in original).)

A. Plaintiffs Did Not Agree to the Terms of Use

The Court's first step when presented with a motion to compel arbitration is to determine whether a valid agreement to arbitrate exists. Chiron Corp., 207 F.3d at 1130 .

It is undisputed that Zappos' Terms of Use constitutes what federal courts have deigned a "browsewrap" agreement. With a browsewrap agreement, a website owner seeks to bind website users to terms and conditions by posting the terms somewhere on the website, usually accessible through a hyperlink located somewhere on the website; in contrast, a "clickwrap" agreement requires users to expressly manifest assent to the terms by, for example, clicking an "I accept" button. Specht v. Netscape Commc'ns Corp., 306 F.3d 17 , 22 n.4 (2d Cir. 2002) (J. Sotomayor). "Because no affirmative action is required by the website user to agree to the terms of a contract other than his or her use of the website, the determination of the validity of a browsewrap contract depends on whether the user has actual or constructive knowledge of a website's terms and conditions." Van Tassell v.United Mktcr. Grp., 795 F.Supp.2d 770 , 790 (N.D. 111. 2011) (citing Pollstarv. Gigmania, Ltd., 170 F.Supp.2d.974, 981 (E.D. Cal. 2000)); see also Mark A. Lemley, Terms of Use, 90 MINN. L. REV. 459, 477 (2006) ("Court may be willing to overlook the utter absence of assent only when there are reasons to believe that the [website user] is aware of the [website owner's] terms."); Note, Ticketmaster Corp. v. Tickers.com, Inc.: Preserving-Minimum Requirements of Contract on the Internet, 19 BERKELEY TECH. L.J. 495, 507 (2004) ("[S]o far courts have held browsewrap agreements enforceable if the website provides sufficient notice of the

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license."). Where, as here, there is no evidence that plaintiffs had actual knowledge of the agreement, "the validity of a browsewrap contract hinges on whether the website provides reasonable notice of the terms of the contract." Van Tassel, 795 F.Supp.2d at 791 (citing Specht, 306 F.3d at 32 ).

Here, the Terms of Use hyperlink can be found on every Zappos webpage, between the middle and bottom of each page, visible if a user scrolls down. (Carton Decl. Ex. 1 (#10-9).) For example, when the Zappos.com homepage is printed to hard copy, the link appears on page 3 of 4. (Id.) The link is the same size, font, and color as most other non-significant links. (Id.) The website does not direct a user to the Terms of Use when creating an account, logging in to an existing account, or making a purchase. (Id.; Carton Decl. Ex. 2 (#10-10), Ex. 3 (#10-11), Ex. 4 (#10-12)., Ex. 5 (#10-13); Ex. 6 (#10-14), Ex. 7 (#10-15).) Without direct evidence that Plaintiffs click on the Terms of Use, we cannot conclude that Plaintiffs ever viewed, let alone manifested assent to, the Terms of Use. The Terms of Use is inconspicuous, buried in the middle to bottom of every Zappos.com webpage among many other links, and the website never directs a user to the Terms of Use. No reasonable user would have reason to click on the Terms of Use, even those users who have alleged that they clicked and relied on statements found in adjacent links, such as the site's "Privacy Policy." This case is therefore factually similar to cases that have decline to enforce arbitration clauses, such as Hines v. Overstock.com, wherein the Court refused to enforce an arbitration provision because the plaintiff "lacked notice of the Terms and Conditions because the website did not prompt her to review the Terms and Conditions and because the link to the Terms and Conditions was not prominently displayed so as to provide reasonable notice of the Terms and Conditions." 668 F.Supp.2d 362 , 367 (E.D.N.Y. 2009) aff'd380 F.App'x 22 (2d Cir. 2010); see also Specht, 306 F.3d at 32 ("[A] reference to the existence of license terms on a submerged screen is not sufficient to place consumers on inquiry or constructive notice of those terms."); Van Tassell, 795 F.Supp.2d at 792 (declining to enforce arbitration provision where "a user only encounters the Conditions of Use after scrolling to the bottom of the home page and clicking the "Customer Service' link, and then scrolling to the bottom of the Customer Service page or clicking the 'conditions of Use, Notices & Disclaimers' link located near the end of a list of links on the page."); Koch Indus., Inc. v. Does, No. 2:10CV1275DAK, [2011 BL 122670 ], 2011 WL 1775765, at *24-25 (D. Utah May 9, 2011) (finding there was no manifested assent where the "Terms of Use ... were available only through a hyperlink at the bottom of the page, and there was no prominent notice that a user would be bound [*5]by those terms."); Cvent, Inc. v. Eventbrite, Inc., 739 F.Supp.2d 927 , 936-37 (E.D. Va. 2010) (declining to enforce "Terms of Use" where "link only appears on event's website via a link buried at the bottom of the first page" and "users of event's website are not required to click on that link, nor are they required to read or assent to the Terms of Use in order to use the website or access any of its content."). We therefore agree with the Hinescourt: "Very little is required to form a contract nowadays — but this alone does not suffice." 668 F.Supp.2d 362 , 367 . Where, as here, there is no acceptance by Plaintiffs, no meeting of the minds, and no manifestation of assent, there is no contract pursuant to Nevada law.

B. The Terms of Use Constitutes an Illusory Contract

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The Priera Plaintiffs argue that because the Terms of Use grants Zappos the unilateral right to revise the Arbitration Clause, the contract is illusory and therefore unenforceable. In other words, Plaintiffs argue that the Arbitration Clause is illusory because Zappos can avoid the promise to arbitrate simply by amending the provision, while Zappos.com users are simultaneously bound to arbitration. Most federal courts that have considered this issue have held that if a party retains the unilateral, unrestricted right to terminate the arbitration agreement, it is illusory and unenforceable, especially where there is no obligation to receive consent from, or even notify, the other parties to the contract. See Doucrlas v. Johnson Real Estate Investors, LLC, 470 F.App'x 823 , 825 (11th Cir. 2012). ("Because the employee handbook allowed Johnson to unilaterally modify the arbitration procedures without notifying Douglas, the agreement to arbitrate was illusory and invalid."); Morrison v. Amway Corp., 517 F.3d 248 , 257-58 (finding arbitration agreement illusory and unenforceable where defendant held unilateral authority to amend or eliminate the arbitration program); Dumais v. Am. Golf Corp., 299 F.3d 1216 , 1219 (10th Cir. 2002) ("We join other circuits in holding that an arbitration agreement allowing one party the unfettered right to alter the arbitration agreement's existence or its scope is illusory."); Penn v. Ryan's Family Steak Houses, Inc., 269 F.3d 753 , 759-61 (7th Cir. 2001) (denying motion to compel arbitration where agreement was illusory because one party had "sole, unilateral discretion to modify or amend"); Floss v. Ryan's Family Steak Houses, Inc., 211 F.3d 306 , 315-316 (6th Cir. 2000) (arbitration agreement was "fatally indefinite" and illusory because employer "reserved the right to alter applicable rules and procedures without any obligation to notify, much less receive consent from," other parties); Hooters of Am., Inc. v. Phillips, 173 F.3d 933 , 939 (4th Cir. 1999) (holding that employer's ability to modify rules "in whole or in part" without notice to employee renders arbitration agreement illusory); Grosvenor v. Qwest Corp., — F.Supp.2d , 2012 WL 602655, at *12 (D. Colo. Feb. 23, 2012) ("Because Qwest reserved an unfettered ability to modify the existence, terms and scope of the arbitration clause, it is illusory and unenforceable."); Harris v. Blockbuster, Inc., 622 F.Supp.2d 396 , 398-99 (N.D. Tex. 2009) (arbitration clause in internet video purchase agreement illusory because defendant reserved the right to alter [*6]the terms of the agreement at any time by giving notice to the consumer); Snow v. BE & KConstr. Co. 126 F.Supp.2d 5 , 14-15 (D. Me. 2001) (holding arbitration agreement illusory and unenforceable because employer "reserve[d] the right to modify or discontinue [the arbitration] program at any time"); Trumbull v. Century Mktcr. Corp., 12 F.Supp.2d 683 , 686 (N.D. Ohio 1998) (finding no binding arbitration agreement where "the plaintiff would be bound by all the terms of the handbook while defendant could simply revoke any term (including the arbitration clause) whenever it desired. Without mutuality of obligation, a contract cannot be enforced.").

Here, the Terms of Use gives Zappos the right to change the Terms of Use, including the Arbitration Clause, at any time without notice to the consumer. On one side, the Terms of Use purportedly binds any user of the Zappos.com website to mandatory arbitration. However, if a consumer sought to invoke arbitration pursuant to the Terms of Use, nothing would prevent Zappos from unilaterally changing the Terms and making those changes applicable to that pending dispute if it determined that arbitration was no longer in its interest. In effect, the agreement allows Zappos to hold its customers and users to the promise to arbitrate while reserving its own escape hatch. By the terms of the Terms of Use, Zappos is free at

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any time to require a consumer to arbitrate and/or litigate anywhere it sees fit, while consumers are required to submit to arbitration in Las Vegas, Nevada. Because the Terms of Use binds consumers to arbitration while leaving Zappos free to litigate or arbitrate wherever it sees fit, there exists no mutuality of obligation. We join those other federal courts that find such arbitration agreements illusory and therefore unenforceable.

C. Equitable Estoppel

"The equitable estoppel doctrine prevents a plaintiff signatory to a contract that contains an arbitration provision from avoiding the agreement to arbitrate if the plaintiff's claims rely on the contract as the basis for relief." Ahlers v. Ryland Homes Nev., LLC, No. 52511, 2010 WL 3276221, at *2 (Nev. 2010) (citing MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942 , 947 (11th Cir. 1999); Hughes Masonry v. Greater Clark Ctv. Sch. Bldg., 659 F.2d 836 , 838 , 840-41 (7th Cir. 1981); Metalclad v. Ventana Evntl., 1 Cal.Rptr.3d 328 , 34-35 (Cal.Ct.App. 2003). Defendants argue that Plaintiffs cannot assert breach of contract actions against Zappos.com while seeking to avoid the arbitration provision of the Terms of Use. However, Plaintiffs' breach of contract claims do not rely upon the contract they seek to avoid, the Terms of Use, which they never viewed, but on other statements and guarantees found on the website. Furthermore, this issue is more appropriate for individual litigation in each of the member cases of the MDL actions as it depends on the allegations found in each complaint. We therefore decline to apply the doctrine of equitable estoppel here.

V. Conclusion

A court cannot compel a party to arbitrate where that party has not previously agreed to arbitrate. The arbitration provision found in the Zappos.com Terms of Use purportedly binds all users of the website by virtue of their browsing. However, the advent of the Internet has not changed the basic requirements of a contract, and there is no agreement where there is no acceptance, no meeting of the minds, and no manifestation of assent. A party cannot assent to terms of which it has no knowledge or constructive notice, and a highly inconspicuous hyperlink buried among a sea of links does not provide such notice. Because Plaintiffs did not assent to the terms, no contract exists, and they cannot be compelled to arbitrate. In any event, even if Plaintiffs could be said to have consented to the terms, the Terms of Use constitutes an illusory contract because it allows Zappos to avoid arbitration by unilaterally changing the Terms at any time, while binding any consumer to mandatory arbitration in Las Vegas, Nevada. We therefore decline to enforce the arbitration provision on two grounds: there is no contract, and even if there was, it would be illusory and therefore unenforceable.

IT IS, THEREFORE, HEREBY ORDERED that Defendant Zappos.com, Inc.'s Motion to Compel Arbitration and Stay Action (#3) is DENIED.

[fn1] Plaintiffs have named both Amazon and Zappos as Defendants. Defendants, however, contend that Amazon does not do business as Zappos.com and is therefore incorrectly named.

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[fn2] In its original Transfer Order (#1), the MDL Panel transferred the following nine cases to this Court, which were consolidated under In reZappos.com, Inc., Customer Data Security Breach Litigation, 3:12-cv-00325-RCJ-VPC: 1. Josh Richards v. Amazon.com, Inc., 6:12-cv-00212 (M.D. Fl.) 2. Sylvia St. Lawrence v. Zappos.com, Inc., 0:12-cv-60133 (S.D. Fl.) 3. Theresa D. Stevens v. Amazon.com, Inc., 3:12-cv-00032 (W.D. Ky.) 4. Stacy Penson v. Amazon.com, Inc., 3:12-CV-00036 (W.D. Ky.) 5. Tara J. Elliot, et al. v. Amazon.com, Inc., 3:12-cv-00037 (W.D. Ky.) 6. Dahlia Habashy v. Amazon.com, Inc., 1:12-cv-10145 (D. Mass.) 7. Stephanie Priera v. Zappos.com, Inc., 2:12-cv-00182 (D. Nev.) 8. Shari Simon, et al. v. Amazon.com, Inc., 2:12-cv-232 (D. Nev.) 9. Robert Ree v. Amazon.com, Inc. dbaZappos.com, 3 :12-cv-00072 (D. Nev.) [fn3] The additional case is Zetha Nobles v. Zappos.com, Inc., 3:12-cv-03131(N.D. Cal.) [fn4] The Motion was originally filed on April 6, 2012 as Document No. 26 in District of Nevada case 3:12-CV-00182.[fn5] While which state's law should apply is not entirely clear given the plethora of states from which these cases arise, the parties apply Nevada law in their respective filings, and the Court will do the same.

 HISCOCK, C. J., and CHASE, COLLIN, HOGAN, CRANE, and ANDREWS, JJ., concur. Judgment accordingly.

 

Lefkowitz v. Great Minneapolis Surplus Store 86 N.W.2d 689 (Minn. 1957)

This is an appeal from an order of the Municipal Court of Minneapolis denying the motion of the defendant for amended findings of fact, or, in the alternative, for a new trial. The order for judgment awarded the plaintiff the sum of $ 138.50 as damages for breach of contract.

This case grows out of the alleged refusal of the defendant to sell to the plaintiff a certain fur piece which it had offered for sale in a newspaper advertisement. It appears from the record that on April 6, 1956, the defendant published the following advertisement in a Minneapolis newspaper:

"Saturday 9 a.m. sharp 3 Brand New Fur Coats 

Worth to $ 100.00 First Come, First Served 

$ 1 Each"On April 13, the defendant again published an advertisement in the same newspaper as follows:

"Saturday 9 a.m. 2 Brand New Pastel Mink 3-Skin Scarfs 

Selling for $ 89.50 Out they go Saturday. 

Each . . . . $ 1.00 

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1 Black Lapin Stole Beautiful, worth $ 139.50 . . . $ 1.00 

First Come, First Served"The record supports the findings of the court that on each of the Saturdays following the publication of the above-described ads the plaintiff was the first to present himself at the appropriate counter in the defendant's store and on each occasion demanded the coat and the stole so advertised and indicated his readiness to pay the sale price of $ 1. On both occasions, the defendant refused to sell the merchandise to the plaintiff, stating on the first occasion that by a "house rule" the offer was intended for women only and sales would not be made to men, and on the second visit that plaintiff knew defendant's house rules.

The trial court properly disallowed plaintiff's claim for the value of the fur coats since the value of these articles was speculative and uncertain. The only evidence of value was the advertisement itself to the effect that the coats were "Worth to $ 100.00," how much less being speculative especially in view of the price for which they were offered for sale. With reference to the offer of the defendant on April 13, 1956, to sell the "1 Black Lapin Stole * * * worth $ 139.50 * * *" the trial court held that the value of this article was established and granted judgment in favor of the plaintiff for that amount less the $ 1 quoted purchase price.

1.  The defendant contends that a newspaper advertisement offering items of merchandise for sale at a named price is a "unilateral offer" which may be withdrawn without notice. He relies upon authorities which hold that, where an advertiser publishes in a newspaper that he has a certain quantity or quality of goods which he wants to dispose of at certain prices and on certain terms, such advertisements are not offers which become contracts as soon as any person to whose notice they may come signifies his acceptance by notifying the other that he will take a certain quantity of them. Such advertisements have been construed as an invitation for an offer of sale on the terms stated, which offer, when received, may be accepted or rejected and which therefore does not become a contract of sale until accepted by the seller; and until a contract has been so made, the seller may modify or revoke such prices or terms. . . .

The defendant relies principally on Craft v. Elder & Johnston Co. supra. In that case, the court discussed the legal effect of an advertisement offering for sale, as a one-day special, an electric sewing machine at a named price. The view was expressed that the advertisement was (34 Ohio L.A. 605, 38 N.E. [2d] 417) "not an offer made to any specific person but was made to the public generally. Thereby it would be properly designated as a unilateral offer and not being supported by any consideration could be withdrawn at will and without notice." It is true that such an offer may be withdrawn before acceptance. Since all offers are by their nature unilateral because they are necessarily made by one party or on one side in the negotation of a contract, the distinction made in that decision between a unilateral offer and a unilateral contract is not clear. On the facts before us we are concerned with whether the advertisement constituted an offer, and, if so, whether the plaintiff's conduct constituted an acceptance.

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There are numerous authorities which hold that a particular advertisement in a newspaper or circular letter relating to a sale of articles may be construed by the court as constituting an offer, acceptance of which would complete a contract. . . .The test of whether a binding obligation may originate in advertisements addressed to the general public is "whether the facts show that some performance was promised in positive terms in return for something requested." 1 Williston, Contracts (Rev. ed.) § 27.

The authorities above cited emphasize that, where the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract. The most recent case on the subject is Johnson v. Capital City Ford Co. (La. App.) 85 So. (2d) 75, in which the court pointed out that a newspaper advertisement relating to the purchase and sale of automobiles may constitute an offer, acceptance of which will consummate a contract and create an obligation in the offeror to perform according to the terms of the published offer.Whether in any individual instance a newspaper advertisement is an offer rather than an invitation to make an offer depends on the legal intention of the parties and the surrounding circumstances. Annotation, 157 A.L.R. 744, 751; 77 C.J.S., Sales, § 25b; 17 C.J.S., Contracts, § 389. We are of the view on the facts before us that the offer by the defendant of the sale of the Lapin fur was clear, definite, and explicit, and left nothing open for negotiation. The plaintiff having successfully managed to be the first one to appear at the seller's place of business to be served, as requested by the advertisement, and having offered the stated purchase price of the article, he was entitled to performance on the part of the defendant. We think the trial court was correct in holding that there was in the conduct of the parties a sufficient mutuality of obligation to constitute a contract of sale.2.  The defendant contends that the offer was modified by a "house rule" to the effect that only women were qualified to receive the bargains advertised. The advertisement contained no such restriction. This objection may be disposed of briefly by stating that, while an advertiser has the right at any time before acceptance to modify his offer, he does not have the right, after acceptance, to impose new or arbitrary conditions not contained in the published offer. . . .Affirmed. 

Procd V. Matthew Zeidenberg (Part 1)

86 F.3d 1447, June 20, 1996, Decided

EASTERBROOK, Circuit Judge. Must buyers of computer software obey the terms of shrinkwrap licenses? The district court held not, for two reasons: first, they are not contracts because the licenses are inside the box rather than printed on the outside; second, federal law forbids enforcement even if the licenses are contracts. 908 F. Supp. 640 (W.D. Wis. 1996). The parties and numerous amici curiae have briefed many other issues, but these are the only two that matter--and we disagree with the district judge's conclusion on each. Shrinkwrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general (for example, if they violate a rule of positive law, or if they are unconscionable).

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Because no one argues that the terms of the license at issue here are troublesome, we remand with instructions to enter judgment for the plaintiff.

IProCD, the plaintiff, has compiled information from more than 3,000 telephone

directories into a computer database. We may assume that this database cannot be copyrighted, although it is more complex, contains more information (nine-digit zip codes and census industrial codes), is organized differently, and therefore is more original than the single alphabetical directory at issue in Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 113 L. Ed. 2d 358, 111 S. Ct. 1282 (1991). See Paul J. Heald, The Vices of Originality, 1991 Sup. Ct. Rev. 143, 160-68. ProCD sells a version of the database, called SelectPhone (trademark), on CD-ROM discs. (CD-ROM means "compact disc--read only memory." The "shrinkwrap license" gets its name from the fact that retail software packages are covered in plastic or cellophane "shrinkwrap," and some vendors, though not ProCD, have written licenses that become effective as soon as the customer tears the wrapping from the package. Vendors prefer "end user license," but we use the more common term.) A proprietary method of compressing the data serves as effective encryption too. Customers decrypt and use the data with the aid of an application program that ProCD has written. This program, which is copyrighted, searches the database in response to users' criteria (such as "find all people named Tatum in Tennessee, plus all firms with 'Door Systems' in the corporate name"). The resulting lists (or, as ProCD prefers, "listings") can be read and manipulated by other software, such as word processing programs.

The database in SelectPhone (trademark) cost more than $ 10 million to compile and is expensive to keep current. It is much more valuable to some users than to others. The combination of names, addresses, and sic codes enables manufacturers to compile lists of potential customers. Manufacturers and retailers pay high prices to specialized information intermediaries for such mailing lists; ProCD offers a potentially cheaper alternative. People with nothing to sell could use the database as a substitute for calling long distance information, or as a way to look up old friends who have moved to unknown towns, or just as a electronic substitute for the local phone book. ProCD decided to engage in price discrimination, selling its database to the general public for personal use at a low price (approximately $ 150 for the set of five discs) while selling information to the trade for a higher price. It has adopted some intermediate strategies too: access to the SelectPhone (trademark) database is available via the America On-line service for the price America Online charges to its clients (approximately $ 3 per hour), but this service has been tailored to be useful only to the general public.

If ProCD had to recover all of its costs and make a profit by charging a single price--that is, if it could not charge more to commercial users than to the general public--it would have to raise the price substantially over $ 150. The ensuing reduction in sales would harm consumers who value the information at, say, $ 200. They get a consumer surplus of $ 50 under the current arrangement but would cease to buy if the price rose substantially. If because of high elasticity of demand in the consumer segment of the market the only way to make a profit turned out to be a price attractive to commercial users alone, then all consumers would lose out--and so would the commercial clients, who would have to pay more for the listings because ProCD could not obtain any contribution toward costs from the consumer market.

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To make price discrimination work, however, the seller must be able to control arbitrage. An air carrier sells tickets for less to vacationers than to business travelers, using advance purchase and Saturday-night-stay requirements to distinguish the categories. A producer of movies segments the market by time, releasing first to theaters, then to pay-per-view services, next to the videotape and laserdisc market, and finally to cable and commercial tv. Vendors of computer software have a harder task. Anyone can walk into a retail store and buy a box. Customers do not wear tags saying "commercial user" or "consumer user." Anyway, even a commercial-user-detector at the door would not work, because a consumer could buy the software and resell to a commercial user. That arbitrage would break down the price discrimination and drive up the minimum price at which ProCD would sell to anyone.

Instead of tinkering with the product and letting users sort themselves--for example, furnishing current data at a high price that would be attractive only to commercial customers, and two-year-old data at a low price--ProCD turned to the institution of contract. Every box containing its consumer product declares that the software comes with restrictions stated in an enclosed license. This license, which is encoded on the CD-ROM disks as well as printed in the manual, and which appears on a user's screen every time the software runs, limits use of the application program and listings to non-commercial purposes.

Matthew Zeidenberg bought a consumer package of SelectPhone (trademark) in 1994 from a retail outlet in Madison, Wisconsin, but decided to ignore the license. He formed Silken Mountain Web Services, Inc., to resell the information in the SelectPhone (trademark) database. The corporation makes the database available on the Internet to anyone willing to pay its price--which, needless to say, is less than ProCD charges its commercial customers. Zeidenberg has purchased two additional SelectPhone (trademark) packages, each with an updated version of the database, and made the latest information available over the World Wide Web, for a price, through his corporation. ProCD filed this suit seeking an injunction against further dissemination that exceeds the rights specified in the licenses (identical in each of the three packages Zeidenberg purchased). The district court held the licenses ineffectual because their terms do not appear on the outside of the packages. The court added that the second and third licenses stand no different from the first, even though they are identical, because they might have been different, and a purchaser does not agree to--and cannot be bound by--terms that were secret at the time of purchase. 908 F. Supp. at 654.

IIFollowing the district court, we treat the licenses as ordinary contracts

accompanying the sale of products, and therefore as governed by the common law of contracts and the Uniform Commercial Code. Whether there are legal differences between "contracts" and "licenses" (which may matter under the copyright doctrine of first sale) is a subject for another day. See Microsoft Corp. v. Harmony Computers & Electronics, Inc., 846 F. Supp. 208 (E.D. N.Y. 1994). Zeidenberg does not argue that Silken Mountain Web Services is free of any restrictions that apply to Zeidenberg himself, because any effort to treat the two parties as distinct would put Silken Mountain behind the eight ball on ProCD's argument that copying the application program onto its hard disk violates the copyright laws. Zeidenberg does argue, and the district court held, that placing the package of software on the shelf is an "offer," which the customer "accepts" by paying the asking price and leaving the store with the goods. Peeters v. State, 154 Wis. 111, 142 N.W. 181 (1913). In

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Wisconsin, as elsewhere, a contract includes only the terms on which the parties have agreed. One cannot agree to hidden terms, the judge concluded. So far, so good--but one of the terms to which Zeidenberg agreed by purchasing the software is that the transaction was subject to a license. Zeidenberg's position therefore must be that the printed terms on the outside of a box are the parties' contract--except for printed terms that refer to or incorporate other terms. But why would Wisconsin fetter the parties' choice in this way? Vendors can put the entire terms of a contract on the outside of a box only by using microscopic type, removing other information that buyers might find more useful (such as what the software does, and on which computers it works), or both. The "Read Me" file included with most software, describing system requirements and potential incompatibilities, may be equivalent to ten pages of type; warranties and license restrictions take still more space. Notice on the outside, terms on the inside, and a right to return the software for a refund if the terms are unacceptable (a right that the license expressly extends), may be a means of doing business valuable to buyers and sellers alike. See E. Allan Farnsworth, 1 Farnsworth on Contracts § 4.26 (1990); Restatement (2d) of Contracts § 211 comment a (1981) ("Standardization of agreements serves many of the same functions as standardization of goods and services; both are essential to a system of mass production and distribution. Scarce and costly time and skill can be devoted to a class of transactions rather than the details of individual transactions."). Doubtless a state could forbid the use of standard contracts in the software business, but we do not think that Wisconsin has done so.

Transactions in which the exchange of money precedes the communication of detailed terms are common. Consider the purchase of insurance. The buyer goes to an agent, who explains the essentials (amount of coverage, number of years) and remits the premium to the home office, which sends back a policy. On the district judge's understanding, the terms of the policy are irrelevant because the insured paid before receiving them. Yet the device of payment, often with a "binder" (so that the insurance takes effect immediately even though the home office reserves the right to withdraw coverage later), in advance of the policy, serves buyers' interests by accelerating effectiveness and reducing transactions costs. Or consider the purchase of an airline ticket. The traveler calls the carrier or an agent, is quoted a price, reserves a seat, pays, and gets a ticket, in that order. The ticket contains elaborate terms, which the traveler can reject by canceling the reservation. To use the ticket is to accept the terms, even terms that in retrospect are disadvantageous. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 113 L. Ed. 2d 622, 111 S. Ct. 1522 (1991); see also Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 132 L. Ed. 2d 462, 115 S. Ct. 2322 (1995) (bills of lading). Just so with a ticket to a concert. The back of the ticket states that the patron promises not to record the concert; to attend is to agree. A theater that detects a violation will confiscate the tape and escort the violator to the exit. One could arrange things so that every concertgoer signs this promise before forking over the money, but that cumbersome way of doing things not only would lengthen queues and raise prices but also would scotch the sale of tickets by phone or electronic data service.

Consumer goods work the same way. Someone who wants to buy a radio set visits a store, pays, and walks out with a box. Inside the box is a leaflet containing some terms, the most important of which usually is the warranty, read for the first time in the comfort of home. By Zeidenberg's lights, the warranty in the box is irrelevant; every consumer gets the standard warranty implied by the UCC in the event the contract is silent; yet so far as we are aware no state disregards

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warranties furnished with consumer products. Drugs come with a list of ingredients on the outside and an elaborate package insert on the inside. The package insert describes drug interactions, contraindications, and other vital information--but, if Zeidenberg is right, the purchaser need not read the package insert, because it is not part of the contract.

Next consider the software industry itself. Only a minority of sales take place over the counter, where there are boxes to peruse. A customer pay place an order by phone in response to a line item in a catalog or a review in a magazine. Much software is ordered over the Internet by purchasers who have never seen a box. Increasingly software arrives by wire. There is no box; there is only a stream of electrons, a collection of information that includes data, an application program, instructions, many limitations ("MegaPixel 3.14159 cannot be used with Byte-Pusher 2.718"), and the terms of sale. The user purchases a serial number, which activates the software's features. On Zeidenberg's arguments, these unboxed sales are unfettered by terms--so the seller has made a broad warranty and must pay consequential damages for any shortfalls in performance, two "promises" that if taken seriously would drive prices through the ceiling or return transactions to the horse-and-buggy age.

According to the district court, the UCC does not countenance the sequence of money now, terms later. (Wisconsin's version of the UCC does not differ from the Official Version in any material respect, so we use the regular numbering system. Wis. Stat. § 402.201 corresponds to UCC § 2-201, and other citations are easy to derive.) One of the court's reasons--that by proposing as part of the draft Article 2B a new UCC § 2-2203 that would explicitly validate standard-form user licenses, the American Law Institute and the National Conference of Commissioners on Uniform Laws have conceded the invalidity of shrinkwrap licenses under current law, see 908 F. Supp. at 655-66--depends on a faulty inference. To propose a change in a law's text is not necessarily to propose a change in the law's effect. New words may be designed to fortify the current rule with a more precise text that curtails uncertainty. To judge by the flux of law review articles discussing shrinkwrap licenses, uncertainty is much in need of reduction--although businesses seem to feel less uncertainty than do scholars, for only three cases (other than ours) touch on the subject, and none directly addresses it. See Step-Saver Data Systems, Inc. v. Wyse Technology, 939 F.2d 91 (3d Cir. 1991); Vault Corp. v. Quaid Software Ltd., 847 F.2d 255, 268-70 (5th Cir. 1988); Arizona Retail Systems, Inc. v. Software Link, Inc., 831 F. Supp. 759 (D. Ariz. 1993). As their titles suggest, these are not consumer transactions. Step-Saver is a battle-of-the-forms case, in which the parties exchange incompatible forms and a court must decide which prevails. See Northrop Corp. v. Litronic Industries, 29 F.3d 1173 (7th Cir. 1994) (Illinois law); Douglas G. Baird & Robert Weisberg, Rules, Standards, and the Battle of the Forms: A Reassessment of § 2-207, 68 Va. L. Rev. 1217, 1227-31 (1982). Our case has only one form; UCC § 2-207 is irrelevant. Vault holds that Louisiana's special shrinkwrap-license statute is preempted by federal law, a question to which we return. And Arizona Retail Systems did not reach the question, because the court found that the buyer knew the terms of the license before purchasing the software.

What then does the current version of the UCC have to say? We think that the place to start is § 2-204(1): "A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." A vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on the kind of conduct

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that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance. And that is what happened. ProCD proposed a contract that a buyer would accept by using the software after having an opportunity to read the license at leisure. This Zeidenberg did. He had no choice, because the software splashed the license on the screen and would not let him proceed without indicating acceptance. So although the district judge was right to say that a contract can be, and often is, formed simply by paying the price and walking out of the store, the UCC permits contracts to be formed in other ways. ProCD proposed such a different way, and without protest Zeidenberg agreed. Ours is not a case in which a consumer opens a package to find an insert saying "you owe us an extra $ 10,000" and the seller files suit to collect. Any buyer finding such a demand can prevent formation of the contract by returning the package, as can any consumer who concludes that the terms of the license make the software worth less than the purchase price. Nothing in the UCC requires a seller to maximize the buyer's net gains.

Section 2-606, which defines "acceptance of goods", reinforces this understanding. A buyer accepts goods under § 2-606(1)(b) when, after an opportunity to inspect, he fails to make an effective rejection under § 2-602(1). ProCD extended an opportunity to reject if a buyer should find the license terms unsatisfactory; Zeidenberg inspected the package, tried out the software, learned of the license, and did not reject the goods. We refer to § 2-606 only to show that the opportunity to return goods can be important; acceptance of an offer differs from acceptance of goods after delivery, see Gillen v. Atalanta Systems, Inc., 997 F.2d 280, 284 n.1 (7th Cir. 1993); but the UCC consistently permits the parties to structure their relations so that the buyer has a chance to make a final decision after a detailed review.

Some portions of the UCC impose additional requirements on the way parties agree on terms. A disclaimer of the implied warranty of merchantability must be "conspicuous." UCC § 2-316(2), incorporating UCC § 1-201(10). Promises to make firm offers, or to negate oral modifications, must be "separately signed." UCC § § 2-205, 2-209(2). These special provisos reinforce the impression that, so far as the UCC is concerned, other terms may be as inconspicuous as the forum-selection clause on the back of the cruise ship ticket in Carnival Lines. Zeidenberg has not located any Wisconsin case--for that matter, any case in any state--holding that under the UCC the ordinary terms found in shrinkwrap licenses require any special prominence, or otherwise are to be undercut rather than enforced. In the end, the terms of the license are conceptually identical to the contents of the package. Just as no court would dream of saying that SelectPhone (trademark) must contain 3,100 phone books rather than 3,000, or must have data no more than 30 days old, or must sell for $ 100 rather than $ 150--although any of these changes would be welcomed by the customer, if all other things were held constant--so, we believe, Wisconsin would not let the buyer pick and choose among terms. Terms of use are no less a part of "the product" than are the size of the database and the speed with which the software compiles listings. Competition among vendors, not judicial revision of a package's contents, is how consumers are protected in a market economy. Digital Equipment Corp. v. Uniq Digital Technologies, Inc., 73 F.3d 756 (7th Cir. 1996). ProCD has rivals, which may elect to compete by offering superior software, monthly updates, improved terms of use, lower price, or a better compromise among these elements. As we stressed above, adjusting terms in buyers' favor might help Matthew Zeidenberg today (he already has the software)

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but would lead to a response, such as a higher price, that might make consumers as a whole worse off. . .

`MARK HARRIS et al., Plaintiffs and Appellants,

v.TIME, INC., Defendant and Respondent

191 Cal.App.3d 449 (1987)

KING, J.In this action where plaintiffs suffered no damage or loss other than having been

enticed by the external wording of a piece of bulk rate mail to open the envelope, believing that doing so would result in the receipt of a free plastic calculator watch, we hold that the maxim “the law disregards trifles” applies and dismissal of the action was proper on this ground . . .

It all began one day when Joshua Gnaizda, the three-year-old son of a prominent Bay Area public interest attorney, received what he (or his mother) thought was a tantalizing offer in the mail from Time. The front of the envelope contained two see-through windows partialy revealing the envelope's contents. One window showed Joshua's name and address. The other revealed the following statement: “JOSHUA A. GNAIZDA, I'LL GIVE YOU THIS VERSATILE NEW CALCULATOR WATCH FREE Just for, Opening this Envelope Before Feb. 15, 1985.” Beneath the offer was a picture of the calculator watch itself. Joshua's mother opened the envelope and apparently realized she had been deceived by a ploy to get her to open a piece of junk mail. The see-through window had not revealed the full text of Time's offer. Printed below the picture of the calculator watch, and not viewable through the see-through window, were the following additional words: “AND MAILING THIS CERTIFICATE TODAY!” The certificate itself clearly required that Joshua purchase a subscription to Fortune magazine in order to receive the free calculator watch.

As is so often true in life situations these days, the certificate contained both good news and bad news. The good news was that Joshua could save up to 66 percent on the subscription, which might even be tax deductible. Even more important to the bargain hunter, prices might never be this low again. The bad news was that Time obviously had no intention of giving Joshua the versatile new calculator watch just for opening the envelope.

Although most of us, while murmuring an appropriate expletive, would have simply thrown away the mailer, and some might have stood on principle and filed an action in small claims court to obtain the calculator watch, Joshua's father did something a little different: he launched a $15 million lawsuit in San Francisco Superior Court.

The action was prosecuted by Joshua, through his father, and by Mark Harris and Richard Baker, who had also received the same mailer. We are not informed of the ages of Harris and Baker. The complaint alleged one cause of action for breach of contract, three causes of action for statutory unfair advertising, and four causes of action for promissory estoppel and fraud.

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The complaint sought the following relief: (1) a declaration that all recipients of the mailer were entitled to receive the promised item or to rescind subscriptions they had purchased, (2) an injunction against future similar mailings, (3) compensatory damages in an amount equal to the value of the item, and (4) $15 million punitive damages to be awarded to a consumer fund “to be used for education and advocacy on behalf of consumer protection and enforcement of laws against unfair business practices.”

The complaint also alleged that before commencing litigation, Joshua's father demanded that Time give Joshua a calculator watch without requiring a subscription. Time not only refused to give a watch, it did not even give Joshua or his father the time of day. There was no allegation that Harris or Baker made such a demand on Time.

Time demurred to the entire complaint for failure to state facts sufficient to constitute a cause of action. The court sustained the demurrer as to the causes of action for breach of contract, promissory estoppel and fraud, but overruled the demurrer as to the causes of action for unfair advertising.

However, Time subsequently obtained summary judgment on the causes of action for unfair advertising. Based on the orders sustaining the demurrer and granting summary judgment, the court rendered a judgment of dismissal.

Plaintiffs filed a notice of appeal after the court granted summary judgment, but two days before rendition of the judgment itself. We treat the notice of appeal as filed immediately after entry of judgment. (Cal. Rules of Court, rule 2(c).)

The appeal challenges the dismissal only as to the causes of action for breach of contract and unfair advertising. Plaintiffs state in their opening brief that they abandon the causes of action for promissory estoppel and fraud . . .

II Breach of ContractIn sustaining the demurrer as to the cause of action for breach of contract, the

court stated no specific grounds for its ruling. Time had argued the complaint did not allege an offer, did not allege adequate consideration, and did not allege notice of performance by the plaintiffs. On appeal, plaintiffs challenge each of these points as a basis for dismissal.

A. Offer.(1a) On the first point, Time argues there was no contract because the text of

the unopened mailer amounted to a mere advertisement rather than an offer.

(2) It is true that advertisements are not typically treated as offers, but merely as invitations to bargain. (1 Corbin on Contracts (1963) § 25, pp. 74-75; Rest.2d, Contracts, § 26, com, b, at p. 76.) There is, however, a fundamental exception to this rule: an advertisement can constitute an offer, and form the basis of a unilateral contract, if it calls for performance of a specific act without further communication and leaves nothing for further negotiation. (Lefkowitz v. Great Minneapolis Surplus Store (1957) 251 Minn. 188 [86 N.W.2d 689, 691]; 1 Corbin on

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Contracts (1963) §§ 25, 64, pp. 75-76, 264-270; Rest.2d, Contracts, § 26, com. b, at p. 76.) This is a basic rule of contract law, contained in the Restatement Second of Contracts and normally encountered within the first few weeks of law school in cases such as Lefkowitz (furs advertised for sale at specified date and time for “$1.00 First Come First Served”) and Carlill v. Carbolic Smoke Ball Co. (1893) 1 Q.B. 256 (advertisement of reward to anyone who caught influenza after using seller's medicine). (See, e.g., Murphy & Speidel, Studies in Contract Law (3d ed. 1984) pp. 112, 154.)

(1b) The text of Time's unopened mailer was, technically, an offer to enter into a unilateral contract: the promisor made a promise to do something (give the recipient a calculator watch) in exchange for the performance of an act by the promise (opening the envelope). Time was not in the same position as a seller merely advertising price; the proper analogy is to a seller promising to give something to a customer in exchange for the customer's act of coming to the store at a specified time. (Lefkowitz v. Great Minneapolis Surplus Store, supra, 86 N.W.2d 689.)

B. Consideration.(3a) Time also argues that there was no contract because the mere act of

opening the envelope was valueless and therefore did not constitute adequate consideration. Technically, this is incorrect. (4) It is basic modern contract law that, with certain exceptions not applicable here (such as illegality or preexisting legal duty), any bargained-for act or forbearance will constitute adequate consideration for a unilateral contract. Courts will not require equivalence in the values exchanged or otherwise question the adequacy of the consideration. If a performance is bargained for, there is no further requirement of benefit to the promisor or detriment to the promisee.

(3b) Moreover, the act at issue here - the opening of the envelope, with consequent exposure to Time's sales pitch - may have been relatively insignificant to the plaintiffs, but it was of great value to Time. At a time when our homes are bombarded daily by direct mail advertisements and solicitations, the name of the game for the advertiser or solicitor is to get the recipient to open the envelope. Some advertisers, like Time in the present case, will resort to ruse or trick to achieve this goal. From Time's perspective, the opening of the envelope was “valuable consideration” in every sense of that phrase.

Thus, assuming (as we must at this juncture) that the allegations of the complaint are true, Time made an offer proposing a unilateral contract, and plaintiffs supplied adequate consideration for that contract when they performed the act of opening the envelope and exposing themselves to the sales pitch within.

. . .

III Conclusion(7) As a final argument, Time claims the judgment of dismissal was correct

based on the legal maxim “de minimis non curat lex,” or “the law disregards trifles.” (Civ. Code, § 3533.) In this age of the consumer class action this maxim usually has little value. However, the present action is “de minimis” in the extreme.

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This lawsuit is an absurd waste of the resources of this court, the superior court, the public interest law firm handling the case and the citizens of California whose taxes fund our judicial system. It is not a use for which our legal system is designed.

As a practical matter, plaintiffs' real complaint is that they were tricked into opening a piece of junk mail, not that they were misled into buying anything or expending more than the effort necessary to open an envelope. If Joshua's mother lost the initial skirmish in the battle of direct mail advertising by opening the envelope, she could have won the war by simply throwing the thing away. If she were angry she might even have returned Time's business reply envelope empty, requiring Time to pay the return postage. If she felt particularly hostile, she might have inserted a nasty note or other evidence of her displeasure in the reply envelope. A $15 million lawsuit, filed in a superior court underfunded and already overburdened with serious felony prosecutions and complex civil litigation involving catastrophic injury from asbestos, prescription drugs and intrauterine devices, is a vast overreaction. The law may permit junk mail to be delivered for a lower cost than the individual citizen must pay. It does not require that the public subsidize junk litigation.

For many, an unpleasant aspect of contemporary American life is returning to the sanctity of one's home each day and emptying the mailbox, only to be inundated with advertisements and solicitations. Some days, among all of the junk mail, one is fortunate to be able to locate a bill, let alone a letter from a friend or loved one. Insult is added to injury when one realizes that individual citizens must pay first class postage rates to send their mail, while junk mail, for reasons apparent only to Congress and the United States Postal Service, is sent at less one-half of that rate. The irritation level soars to new heights when, succumbing to the cleverness or ruse of the sender of junk mail and believing one is being offered something for nothing, one actually opens an envelope and examines its contents, both of which would otherwise been deposited unopened in their rightful place, the garbage can. Snake oil salesmen have been replaced by bulk rate advertisers whose wares must be causing our postal carriers' backs to be nearing the breaking point under the weight of such mail.

As much as one might decry this intrusion into our lives and our homes and sympathize with Joshua's plight, eliminating it lies with Congress, not the courts. The courts cannot solve every complaint or right every technical wrong, particularly one which causes no actual damage beyond the loss of the few seconds it takes to open an envelope and examine its contents. Our courts are too heavily overburdened to be used as a vehicle to punish by one whose only real damage is feeling foolish for having opened what obviously was junk mail.

We therefore affirm, despite the partial technical validity of the action, because the judgment is correct based on the “de minimis” theory.

(8) A judgment that is correct on any theory will be affirmed even if the reasons stated by the trial court in support of the judgment were wrong. (Davey v. Southern Pacific Co., supra, 116 Cal. at p.329.)

The judgment is affirmed. The parties shall bear their own costs on appeal.

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Low, P. J., and Haning, J., concurred.

Cole-McIntyre-Norfleet Co. v. Holloway

214 S.W. 817 (Tenn. 1919)

Lansden, C. J.

This case presents a question of law, which, so far as we are advised, has not been decided by this court in its exact phases. March 26, 1917, a traveling salesman of plaintiff in error solicited and received from defendant in error, at his country store in Shelby county, Tenn., an order for certain goods, which he was authorized to sell. Among these goods were 50 barrels of meal. The meal was to be ordered out by defendant by the 3lst day of July, and afterwards 5 cents per barrel per month was to be charged him for storage.

After the order was given, the defendant heard nothing from it until the 26th of May, 1917, when he was in the place of business of plaintiff in error, and told it to begin shipment of the meal on his contract. He was informed by plaintiff in error that he did not accept the order of March 26th, and for that reason the defendant had no contract for meal.

The defendant in error never received confirmation or rejection from plaintiff in error, or other refusal to fill the order. The same traveling salesman of plaintiff in error called on defendant as often as once each week, and this order was not mentioned to defendant, either by him or by his principals, in any way. Between the day of its alleged rejection, prices on all of the articles in the contract greatly advanced. All of the goods advanced about 50 percent in value.

Some jobbers at Memphis received orders from their drummers, and filled the orders or notified the purchaser that the orders were rejected; but this method was not followed by plaintiff in error.

The contract provided that it was not binding until accepted by the seller at its office in Memphis, and that the salesman had no authority to sign the contract for either the seller or buyer. It was further stipulated that the order should not be subject to countermand.

It will be observed that plaintiff in error was silent upon both the acceptance and rejection of the contract. It sent forth its salesman to solicit this and other orders. The defendant in error did not have the right to countermand orders and the contract was closed, if and when it was accepted by plaintiff in error. The proof that some jobbers in Memphis uniformly filled such order unless the purchaser was notified to the contrary is of no value because it does not amount to a custom.

The case, therefore, must be decided upon its facts. The circuit court and the court of civil appeals were both of opinion that the contract was completed because of the lapse of time before plaintiff in error rejected it. The time intervening between the giving of the order by defendant and its alleged repudiation by plaintiff

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in error was about 60 days. Weekly opportunities were afforded the salesman of plaintiff in error to notify the defendant in error of the rejection of the contract, and, of course, daily occasions were afforded plaintiff in error to notify him by mail or wire. The defendant believed the contract was in force on the 26th of May, because he directed plaintiff in error to begin shipment of the meal on that day. Such shipments were to have been completed by July 31st, or defendant to pay storage charges. From this evidence the Circuit Court found as an inference of fact that plaintiff in error had not acted within a reasonable time, and therefore its silence would be construed as an acceptance of the contract. The question of whether the delay of plaintiff in error was reasonable or unreasonable was one of fact, and the circuit court was justified from the evidence in finding that the delay was unreasonable. Hence the case, as it comes to us, is whether delay upon the part of plaintiff in error for an unreasonable time in notifying the defendant in error of its action upon the contract is an acceptance of its terms.

We think such delay was unreasonable, and effected an acceptance of the contract. It should not be forgotten that this is not the case of an agent exceeding his authority, or acting without authority. Even in such cases the principal must accept or reject the benefits of the contract promptly and within a reasonable time. Williams v. Storm, 6 Cold. 207.

Plaintiff's agent in this case was authorized to do precisely that which he could do, both as to time and substance. The only thing which was left open by the contract was the acceptance or rejection of its terms by plaintiff in error. It will not do to say that a seller of goods like these could wait indefinitely to decide whether or not he will accept the offer of the proposed buyer. This was all done in the usual course of business, and the articles embraced within the contract were consumable in the use, and some of them would become unfitted for the market within a short time.

It is undoubtedly true that an offer to buy or sell is not binding until its acceptance is communicated to the other party. The acceptance, however, of such an offer, may be communicated by the other party either by a formal acceptance, or acts amounting to an acceptance. Delay in communicating action as to the acceptance may amount to an acceptance itself.

When the subject of a contract, either in its nature or by virtue of conditions of the market, will become unmarketable by delay, delay in notifying the other party of his decision will amount to an acceptance by the offeror. Otherwise, the offeror could place his goods upon the market, and solicit orders, and yet hold the other party to the contract, while he reserves time to himself to see if the contract will be profitable.

Writ denied.

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Joe Douglas v. Talk America Inc.

495 F.3d 1062 C.A.9 (Cal.),2007

PER CURIAM:

We consider whether a service provider may change the terms of its service contract by merely posting a revised contract on its website.

FactsJoe Douglas contracted for long distance telephone service with America Online.

Talk America subsequently acquired this business from AOL and continued to provide telephone service to AOL's former customers. Talk America then added four provisions to the service contract: (1) additional service charges; (2) a class action waiver; (3) an arbitration clause; and (4) a choice-of-law provision pointing to New York law. Talk America posted the revised contract on its website but, according to Douglas, it never notified him that the contract had changed. Unaware of the new terms, Douglas continued using Talk America's services for four years.

After becoming aware of the additional charges, Douglas filed a class action lawsuit in district court, charging Talk America with violations of the Federal Communications Act, breach of contract and violations of various California consumer protection statutes. Talk America moved to compel arbitration based on the modified contract and the district court granted the motion. Because the Federal Arbitration Act, 9 U.S.C. § 16, does not authorize interlocutory appeals of a district court order compelling arbitration, Douglas petitioned for a writ of mandamus.

AnalysisBecause a writ of mandamus is an extraordinary remedy, we have developed

five factors that cabin our power to grant the writ:

1. “The party seeking the writ has no other adequate means, such as a direct appeal, to attain the relief he or she desires.”

2. “The petitioner will be damaged or prejudiced in a way not correctable on appeal.”

3. “The district court's order is clearly erroneous as a matter of law.”

4. “The district court's order is an oft-repeated error, or manifests a persistent disregard of the federal rules.”

5. “The district court's order raises new and important problems, or issues of law of first impression.”

Bauman v. U.S. Dist. Court, 557 F.2d 650, 654-55 (9th Cir.1977).

The third factor is a necessary condition for granting a writ of mandamus. Executive Software N. Am., Inc. v. U.S. Dist. Court, 24 F.3d 1545, 1551 (9th

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Cir.1994). But “all five factors need not be satisfied at once.” Valenzuela-Gonzalez v. U.S. Dist. Court, 915 F.2d 1276, 1279 (9th Cir.1990). If the district court clearly erred, we determine whether the four additional factors “in the mandamus calculus point in favor of granting the writ.” Executive Software, 24 F.3d at 1551.

1. Douglas alleges that Talk America changed his service contract without notifying him. He could only have become aware of the new terms if he had visited Talk America's website and examined the contract for possible changes. The district court seems to have assumed Douglas had visited the website when it noted that the contract was available on “the web site on which Plaintiff paid his bills.” However, Douglas claims that he authorized AOL to charge his credit card automatically and Talk America continued this practice, so he had no occasion to visit Talk America's website to pay his bills. Even if Douglas had visited the website, he would have had no reason to look at the contract posted there. Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side.FN1 Indeed, a party can't unilaterally change the terms of a contract; it must obtain the other party's consent before doing so. Union Pac. R.R. v. Chi., Milwaukee, St. Paul & Pac. R.R., 549 F.2d 114, 118 (9th Cir.1976). This is because a revised contract is merely an offer and does not bind the parties until it is accepted. Matanuska Val Farmers Cooperating Ass'n v. Monaghan, 188 F.2d 906, 909 (9th Cir.1951). And generally “an offeree cannot actually assent to an offer unless he knows of its existence.” 1 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 4:13, at 365 (4th ed.1990); see also Trimble v. N.Y. Life Ins. Co., 234 A.D. 427, 255 N.Y.S. 292, 297 (1932) (“An offer may not be accepted until it is made and brought to the attention of the one accepting.”). Even if Douglas's continued use of Talk America's service could be considered assent, such assent can only be inferred after he received proper notice of the proposed changes. Douglas claims that no such notice was given.

FN1. Nor would a party know when to check the website for possible changes to the contract terms without being notified that the contract has been changed and how. Douglas would have had to check the contract every day for possible changes. Without notice, an examination would be fairly cumbersome, as Douglas would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed.

Crawford v. Talk America, Inc., No. 05-CV-0180-DRH, 2005 WL 2465909, at *4 (S.D.Ill. Oct. 6, 2005), and Bischoff v. DirecTV, Inc., 180 F.Supp.2d 1097, 1103-06 (C.D.Cal.2002), on which the district court relied, are not to the contrary. The customers in these cases received notice of the modified contract by mail. The service provider in Bischoff mailed the contract to the customer, 180 F.Supp.2d at 1101, and the service provider in Crawford gave notice to the customer that she could see the contract terms online or call the service provider to learn of the terms. 2005 WL 2465909, at *3 n. 3. Furthermore, Crawford*1067 and Bischoff involved new customers who necessarily would be on notice that they were required to assent to contract terms as a predicate for using the service. By contrast, the California Court of Appeal has held that a revised contract containing an arbitration clause is unenforceable against existing customers, even when they

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are given notice by mail. Badie v. Bank of Am., 67 Cal.App.4th 779, 801, 79 Cal.Rptr.2d 273 (1998).

The district court thus erred in holding that Douglas was bound by the terms of the revised contract when he was not notified of the changes. The error reflects fundamental misapplications of contract law and goes to the heart of petitioner's claim. It would alone be sufficient to satisfy the third Bauman factor, but the district court also committed two additional errors. Even if Douglas were bound by the new terms of the contract (which he is not for the reasons already explained), the new terms probably would not be enforceable in California because they conflict with California's fundamental policy as to unconscionable contracts.FN2 In New York, as in California, a contract is unconscionable only if it is both procedurally and substantively unconscionable. See Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83, 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000); Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1, 10, 537 N.Y.S.2d 787, 534 N.E.2d 824 (1988). That's where the similarities end. The district court erred in analyzing California law as to both procedural and substantive unconscionability.

FN2. Under the Federal Arbitration Act (FAA), 9 U.S.C. § 2, “[a]rbitration agreements ... are subject to all defenses to enforcement that apply to contracts generally.” Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir.2003). Thus, “[t]o evaluate the validity of an arbitration agreement, federal courts ‘should apply ordinary state-law principles that govern the formation of contracts.’ ” Id. (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). Such state-law principles come from the law of a particular state-not federal general common law under the FAA. See First Options, 514 U.S. at 944, 115 S.Ct. 1920. Here, Douglas has raised the state law defenses of lack of contract formation and unconscionability, so we must determine which state's law applies.

The FAA “does not create any independent federal-question jurisdiction.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The district court exercised supplemental jurisdiction in this case. When a federal court exercises supplemental jurisdiction, “the federal court applies the choice-of-law rules of the forum state,” which in this case is California. Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1164 (9th Cir.1996).

Under California's choice-of-law rules, the district court may not enforce the choice-of-law provision pointing to New York law if (1) New York's substantive law is contrary to a fundamental policy entrenched in California's substantive law and (2) California has a “materially greater interest” than New York in determining the issue. Wash. Mut. Bank, FA v. Superior Court, 24 Cal.4th 906, 916-17, 103 Cal.Rptr.2d 320, 15 P.3d 1071 (2001) (quoting Restatement (Second) of Conflict of Laws § 187(2)). To determine which state has the materially greater interest, we look to the domicile of the parties and the place of the wrong. See Reich v. Purcell, 67 Cal.2d 551, 555, 63 Cal.Rptr. 31, 432 P.2d 727 (1967). California certainly has an interest in protecting the thousands of citizens in the California

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subclass of this class action from unconscionable contracts. And this interest is materially greater than New York's interest because Talk America is a Pennsylvania corporation with its principal place of business in Pennsylvania. Therefore, if New York law conflicts with a fundamental policy of California, the choice-of-law provision cannot be enforced and California law would apply.

The district court held that the arbitration clause in the modified contract is not procedurally unconscionable (and therefore enforceable) because Douglas had meaningful alternative choices for telephone service. Under New York law this choice forecloses any procedural unconscionability claim. See Ranieri v. Bell Atl. Mobile, 304 A.D.2d 353, 759 N.Y.S.2d 448, 449 (2003). However, after the district court made its ruling, we noted that California “has rejected the notion that the availability ... of substitute ... services alone can defeat a claim of procedural unconscionability.” Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1283 (9th Cir.2006) (en banc). In California, a contract can be procedurally unconscionable if a service provider has overwhelming bargaining power and presents a “take-it-or-leave-it” contract to a customer-even if the customer has a meaningful choice as to service providers. Id. at 1284.

Likewise, the district court held that the class action waiver provision is not substantively unconscionable. Such waivers aren't substantively unconscionable under New York law. See Hayes v. County Bank, 26 A.D.3d 465, 811 N.Y.S.2d 741, 743 (2006); Tsadilas v. Providian Nat'l Bank, 13 A.D.3d 190, 786 N.Y.S.2d 478, 480 (App.Div.2004); Ranieri, 759 N.Y.S.2d at 449. The district court cited Provencher v. Dell, Inc., 409 F.Supp.2d 1196, 1201 (C.D.Cal.2006), for the proposition that California law was in accord, but the California Court of Appeal in Cohen v. DirecTV, Inc., 142 Cal.App.4th 1442, 1455 n. 13, 48 Cal.Rptr.3d 813 (Ct.App.2006), expressly disavowed Provencher. A class action waiver provision thus may be unconscionable in California. Whether it is depends on the facts and circumstances developed during the course of litigation. The district court clearly erred in holding that the clauses (assuming that they are part of the contract at all) are consistent with California policy and therefore enforceable as a matter of law.

Because we find that the district court committed clear errors of law, we turn to the remaining four Bauman factors.

2. The first and second Bauman factors weigh in favor of granting mandamus relief.FN3 If Douglas is forced to arbitrate, he “has no other adequate means” of ensuring that he can continue as the class representative. Bauman, 557 F.2d at 654. This would “prejudice [ ]” Douglas “in a way not correctable on appeal.” Id.

FN3. We generally examine the first and second factors together. See Bauman, 557 F.2d at 654 (the second factor “is closely related to the first”).

If Douglas wins the arbitration and is awarded all the damages he asks for, then his individual claim would be rendered moot.FN4 Douglas couldn't avoid mootness by moving to vacate the arbitration award solely because he wanted to continue as the class representative. There are only four permissible grounds for vacating an arbitration award: (1) “the award was procured by corruption, fraud, or undue

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means”; (2) “there was evident partiality or corruption in the arbitrators”; (3) the arbitrators “refus[ed] to postpone the hearing” even when there was sufficient cause to postpone, “refus[ed] to hear evidence pertinent and material to the controversy” or engaged in “other misbehavior”; and (4) “where the arbitrators exceeded their powers.” 9 U.S.C. § 10(a). In sum, a party needs to show “affirmative misconduct” or “irrational[ity]” in the arbitration to vacate an arbitration award. Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 998 (9th Cir.2003) (en banc). Losing the opportunity to continue as a class representative doesn't come close to meeting this standard.

FN4. If Douglas were to lose the arbitration or were awarded less than he seeks, his claim would not be moot, as he would be able to challenge the district court's order compelling arbitration as part of his appeal of the arbitration award. See Sanford v. MemberWorks, Inc., 483 F.3d 956, 960 (9th Cir.2007) (reversing a district court's order compelling arbitration when the plaintiff received an arbitration award on a restitution claim but “[t]he arbitrator found for [defendant] on [plaintiff's] other claims”).

If Douglas's individual claim is rendered moot because it is fully satisfied as a result of the arbitration, he would lose his status as class representative because he would no longer have a concrete stake in the controversy. It is also doubtful that he could appeal the district court's order confirming an award that fully satisfied his individual claim, and he would thus have no opportunity to challenge the district court's order compelling the arbitration in the first place. It is thus entirely possible that the district court's clear error in compelling arbitration would be insulated from appellate review. Bauman, 557 F.2d at 654.

3. The fifth Bauman factor also favors mandamus relief. The district court's order enforcing new contractual terms when a customer is only given notice of the terms by having the contract posted on the internet “raises new and important problems” and addresses “issues of law of first impression.” Bauman, 557 F.2d at 655. This is the first time any federal court of appeals has considered whether to enforce a modified contract with a customer where the customer claims that the only notice of the changed terms consisted of posting the revised contract on the provider's website. This issue is also of some significance, as it potentially affects the relationship of numerous service providers with millions of customers, and thus deserves immediate resolution.

* * *Because four of the five Bauman factors favor mandamus relief, and only one

factor (the fourth) militates against it, we conclude that the balance of factors favors issuing the writ. The district court's order compelling arbitration is vacated.

Steven J. Caspi v. The Microsoft Network, L.L.C., and Microsoft Corporation

SUPERIOR COURT OF NEW JERSEY, APPELLATE DIVISION323 N.J. Super. 118; 732 A.2d 528

July 2, 1999, DecidedKESTIN, J.A.D.

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We are here called upon to determine the validity and enforceability of a forum selection clause contained in an on-line subscriber agreement of the Microsoft Network (MSN), an on-line computer service. The trial court granted defendants' motion to dismiss the complaint on the ground that the forum selection clause in the parties' contracts called for plaintiffs' claims to be litigated in the State of Washington. Plaintiffs appeal. We affirm.

The amended class action complaint in eighteen counts sought divers relief against two related corporate entities, The Microsoft Network, L.L.C. and Microsoft Corporation (collectively, Microsoft). Plaintiffs asserted various theories including breach of contract, common law fraud, and consumer fraud in the way Microsoft had "rolled over" MSN membership into more expensive plans. Among the claims was an accusation that Microsoft had engaged in "unilateral negative option billing," a practice condemned by the attorneys general of twenty-one states, including New Jersey's, with regard to a Microsoft competitor, America Online, Inc. Under the practice as alleged, Microsoft, without notice to or permission from MSN members, unilaterally charged them increased membership fees attributable to a change in service plans.

The four named plaintiffs are members of MSN. Two reside in New Jersey; the others in Ohio and New York. Purporting to represent a nationwide class of 1.5 million similarly aggrieved MSN members, plaintiffs, in May 1997, moved for multi-state class action certification.

Shortly thereafter, defendants moved to dismiss the amended complaint for lack of jurisdiction and improper venue by reason of the forum selection clause which, defendants contended, was in every MSN membership agreement and bound all the named plaintiffs and all members of the class they purported to represent. That clause, paragraph 15.1 of the MSN membership agreement, provided:

This agreement is governed by the laws of the State of Washington, USA, and you consent to the exclusive jurisdiction and venue of courts in King County, Washington in all disputes arising out of or relating to your use of MSN or your MSN membership.

Plaintiffs cross-moved, inter alia, to strike a certification submitted in support of defendants' motion to dismiss and to compel the deposition of the certificant.

On November 13, 1997, Judge Fitzpatrick, in a written opinion, expressed his reasons for dismissing the complaint based upon the forum selection clause. Given that conclusion, plaintiffs' cross-motions were denied perforce, and plaintiffs' motion to certify the class was denied as moot. Conforming orders were entered on the same date. On December 19, 1997, Judge Fitzpatrick entered an order modifying a passage in his November 13 opinion.

The background of the matter was depicted in the amended opinion:Before becoming an MSN member, a prospective subscriber is prompted by MSN software to view multiple computer screens of information, including a membership agreement which contains the above clause. MSN's membership agreement appears on the computer screen in a scrollable window next to blocks providing the choices "I Agree" and "I Don't Agree." Prospective members assent to the terms of the agreement by clicking on "I Agree" using

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a computer mouse. Prospective members have the option to click "I Agree" or "I Don't Agree" at any point while scrolling through the agreement. Registration may proceed only after the potential subscriber has had the opportunity to view and has assented to the membership agreement, including MSN's forum selection clause. No charges are incurred until after the membership agreement review is completed and a subscriber has clicked on "I Agree."

The trial court observed:

Generally, forum selection clauses are prima facie valid and enforceable in New Jersey. See McNeill v. Zoref, 297 N.J. Super. 213, 687 A.2d 1052 (App. Div. 1997). New Jersey courts will decline to enforce a clause only if it fits into one of three exceptions to the general rule: (1) the clause is a result of fraud or "overweening" bargaining power; (2) enforcement would violate the strong public policy of New Jersey; or (3) enforcement would seriously inconvenience trial. Wilfred MacDonald, Inc. v. Cushman, Inc., 256 N.J. Super. 58, 606 A.2d 407 (App. Div.), certif. denied, 130 N.J. 17 (1992). The burden falls on the party objecting to enforcement to show that the clause in question fits within one of these exceptions. Id. Plaintiffs have failed to meet that burden here. . . .

[The defendants argued that each of the exceptions applied in this case; the both the trial and appeals courts rejected these arguments; the appeals court then turned to the question of whether the presentation of the MSN's membership agreement via a computer screen meant that the plaintiff’s lacked noticed of the forum selection clause.]

The only viable issues that remain bear upon the argument that plaintiffs did not receive adequate notice of the forum selection clause, and therefore that the clause never became part of the membership contract which bound them. A related, alternative argument is that the question of notice is a factual matter that should be submitted to a jury. Defendants respond by arguing that 1) in the absence of fraud, a contracting party is bound by the provisions of a form contract even if he or she never reads them; 2) this clause met all reasonable standards of conspicuousness; and 3) the sign-up process gave plaintiffs ample opportunity to review and reject the agreement. Defendants also contend that notice is a question of law, decidable by a court, not a jury.

The holding in Carnival Cruise Lines v. Shute, 499 U.S. 585, 111 S. Ct. 1522, 113 L. Ed. 2d 622 (1991), does not dispose of the notice question because the plaintiffs there had "essentially ... conceded that they had notice of the forum-selection provision[,]" by stating that they "'[did] not contest ... that the forum selection clause was reasonably communicated to [them], as much as three pages of fine print can be communicated.'" Id. at 590, 111 S. Ct. at 1525, 113 L. Ed. 2d at 630. The dissenting justices described the format in which the forum selection clause had been presented as "in the fine print on the back of the [cruise] ticket." Id. at 597, 111 S. Ct. at 1529, 113 L. Ed. 2d at 634 (Stevens, J., dissenting).

The scenario presented here is different because of the medium used, electronic versus printed; but, in any sense that matters, there is no significant distinction. The

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plaintiffs in Carnival could have perused all the fine-print provisions of their travel contract if they wished before accepting the terms by purchasing their cruise ticket. The plaintiffs in this case were free to scroll through the various computer screens that presented the terms of their contracts before clicking their agreement.

Also, it seems clear that there was nothing extraordinary about the size or placement of the forum selection clause text. By every indication we have, the clause was presented in exactly the same format as most other provisions of the contract. It was the first item in the last paragraph of the electronic document. We note that a few paragraphs in the contract were presented in upper case typeface, presumably for emphasis, but most provisions, including the forum selection clause, were presented in lower case typeface. We discern nothing about the style or mode of presentation, or the placement of the provision, that can be taken as a basis for concluding that the forum selection clause was proferred unfairly, or with a design to conceal or de-emphasize its provisions. To conclude that plaintiffs are not bound by that clause would be equivalent to holding that they were bound by no other clause either, since all provisions were identically presented. Plaintiffs must be taken to have known that they were entering into a contract; and no good purpose, consonant with the dictates of reasonable reliability in commerce, would be served by permitting them to disavow particular provisions or the contracts as a whole. See Rudbart v. North Jersey Dist. Water Supply Comm'n, 127 N.J. 344, 351-53, 605 A.2d 681 (referring to the principle that a contracting party may be bound by the terms of a form contract even if he or she has never read them), cert. denied, 506 U.S. 871, 113 S. Ct. 203, 121 L. Ed. 2d 145 (1992).

The issue of reasonable notice regarding a forum selection clause is a question of law for the court to determine. See Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 9 (2d Cir. 1995); Hodes v. S.N.C. Achille Lauro Ed Altri-Gestione, 858 F.2d 905, 908 (3d Cir. 1988), petition for cert. dismissed, 490 U.S. 1001, 109 S. Ct. 1633, 104 L. Ed. [***14] 2d 149 (1989), abrogated in other grounds, Lauro Lines, S.R.L. v. Chasser, 490 U.S. 495, 109 S. Ct. 1976, 104 L. Ed. 2d 548 (1989). We agree with the trial court that, in the absence of a better showing than has been made, plaintiffs must be seen to have had adequate notice of the forum selection clause. The resolution of this notice issue, at this stage of the litigation between plaintiffs and defendants must, of course, be seen to be without prejudice to any showing either party may have the opportunity to make in another jurisdiction in a plenary proceeding on the contract regarding issues apart from the validity and enforceability of the forum selection clause.

Affirmed.

Notes and Questions

In Capsi, it was clear, from the presentation of the MSN membership agreement, (1) that the plaintiffs were being invited to enter a contractual relationship, which was (2) readily accessible, and which (3) could be accepted or rejected by performing or refraining from an affirmative act of agreement (clicking the button). There are contracting practices that depart from this affirmative-act-of-agreement paradigm.

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To what extent may one depart from this paradigm and still form a binding contractual agreement? The next case, ProCd v. Zeidenberg, raises this question. The case concerns “shrinkwrap” licenses. “Shrinkwrap” refers to practice of packaging many consumer goods in a tight-fitting plastic film, called shrinkwrap (the plastic film shrinks when heated; this is how the tight-fit is achieved). In ProCD, Zeidenberg purchase software contained inside a shrinkwraped box; a software license was also included inside the box, and hence could not be viewed until the box was purchased and opened. This departs from the affirmative-act-of-agreement paradigm above. The contract is not accessible until after purchase. Does this fact mean the license agreement is unenforceable?

Note on terminology: ProCd v. Zeidenberg has been very influential, and its “shrink wrap” terminology has been widely adopted and extended. Thus, contracts in which assent is indicated by clicking on a button—as illustrated by Caspi—are sometimes called “click wrap” contracts.

ProCD v. Zeidenberg (Part 2)86 F.3d 1447, (1996)

EASTERBROOK, Circuit Judge. . . .

IIIThe district court held that, even if Wisconsin treats shrinkwrap licenses as

contracts, § 301(a) of the Copyright Act, 17 U.S.C. § 301(a), prevents their enforcement. 908 F. Supp. at 656-59. The relevant part of § 301(a) preempts any "legal or equitable rights [under state law] that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103".

If a federal statute preempts a state law, the state law is unenforceable. See the tutorial on preemption for details.

ProCD's software and data are "fixed in a tangible medium of expression", and the district judge held that they are "within the subject matter of copyright". The latter conclusion is plainly right for the copyrighted application program, and the judge thought that the data likewise are "within the subject matter of copyright" even if, after Feist, they are not sufficiently original to be copyrighted. . . . One function of § 301(a) is to prevent states from giving special protection to works of authorship that Congress has decided should be in the public domain, which it can accomplish only if "subject matter of copyright" includes all works of a type covered by sections 102 and 103, even if federal law does not afford protection to them. . . .

But are rights created by contract "equivalent to any of the exclusive rights within the general scope of copyright"? Three courts of appeals have answered "no." National Car Rental Systems, Inc. v. Computer Associates International, Inc., 991 F.2d 426, 433 (8th Cir. 1993); Taquino v. Teledyne Monarch Rubber, 893 F.2d 1488, 1501 (5th Cir. 1990); Acorn Structures, Inc. v. Swantz, 846 F.2d 923, 926 (4th Cir. 1988). The district court disagreed with these decisions, 908 F. Supp. at 658,

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but we think them sound. Rights "equivalent to any of the exclusive rights within the general scope of copyright" are rights established by law—rights that restrict the options of persons who are strangers to the author. Copyright law forbids duplication, public performance, and so on, unless the person wishing to copy or perform the work gets permission; silence means a ban on copying. A copyright is a right against the world. Contracts, by contrast, generally affect only their parties; strangers may do as they please, so contracts do not create "exclusive rights." Someone who found a copy of SelectPhone (trademark) on the street would not be affected by the shrinkwrap license—though the federal copyright laws of their own force would limit the finder's ability to copy or transmit the application program.

The claim is that a right created by contract with regard to copyright material would be “equivalent” to a right established by the copyright statute only when the following was true: the contract created a right against everyone, not just against parties to the contract. (a) True(b) False

Think for a moment about trade secrets. One common trade secret is a customer list. After Feist, a simple alphabetical list of a firm's customers, with address and telephone numbers, could not be protected by copyright. Yet Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 40 L. Ed. 2d 315, 94 S. Ct. 1879 (1974), holds that contracts about trade secrets may be enforced—precisely because they do not affect strangers' ability to discover and use the information independently.

Since contracts about trade secrets do not affect strangers' ability to discover and use the information independently,” they are not equivalent to rights created by the copyright statute. (a) Yes(b) No

If the amendment of § 301(a) in 1976 overruled Kewanee and abolished consensual protection of those trade secrets that cannot be copyrighted, no one has noticed—though abolition is a logical consequence of the district court's approach. Think, too, about everyday transactions in intellectual property. A customer visits a video store and rents a copy of Night of the Lepus. The customer's contract with the store limits use of the tape to home viewing and requires its return in two days. May the customer keep the tape, on the ground that § 301(a) makes the promise unenforceable?

A law student uses the LEXIS database, containing public-domain documents, under a contract limiting the results to educational endeavors; may the student resell his access to this database to a law firm from which LEXIS seeks to collect a much higher hourly rate? Suppose ProCD hires a firm to scour the nation for telephone directories, promising to pay $ 100 for each that ProCD does not already have. The firm locates 100 new directories, which it sends to ProCD with an invoice for $ 10,000. ProCD incorporates the directories into its database; does it have to pay the bill? Surely yes; Aronson v. Quick Point Pencil Co., 440 U.S. 257, 59 L. Ed. 2d 296, 99 S. Ct. 1096 (1979), holds that promises to pay for intellectual property may be enforced even though federal law (in Aronson, the patent law) offers no protection against third-party uses of that property. See also Kennedy v. Wright,

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851 F.2d 963 (7th Cir. 1988). But these illustrations are what our case is about. ProCD offers software and data for two prices: one for personal use, a higher price for commercial use. Zeidenberg wants to use the data without paying the seller's price; if the law student and Quick Point Pencil Co. could not do that, neither can Zeidenberg.

Although Congress possesses power to preempt even the enforcement of contracts about intellectual property . . . courts usually read preemption clauses to leave private contracts unaffected. American Airlines, Inc. v. Wolens, 130 L. Ed. 2d 715, 115 S. Ct. 817 (1995), provides a nice illustration. A federal statute preempts any state "law, rule, regulation, standard, or other provision ... relating to rates, routes, or services of any air carrier." 49 U.S.C. App. § 1305(a)(1). Does such a law preempt the law of contracts--so that, for example, an air carrier need not honor a quoted price (or a contract to reduce the price by the value of frequent flyer miles)? The Court allowed that it is possible to read the statute that broadly but thought such an interpretation would make little sense. Terms and conditions offered by contract reflect private ordering, essential to the efficient functioning of markets. 115 S. Ct. at 824-25. Although some principles that carry the name of contract law are designed to defeat rather than implement consensual transactions, id. at 826 n.8, the rules that respect private choice are not preempted by a clause such as § 1305(a)(1). Section 301(a) plays a role similar to § 1301(a)(1): it prevents states from substituting their own regulatory systems for those of the national government. Just as § 301(a) does not itself interfere with private transactions in intellectual property, so it does not prevent states from respecting those transactions. Like the Supreme Court in Wolens, we think it prudent to refrain from adopting a rule that anything with the label "contract" is necessarily outside the preemption clause: the variations and possibilities are too numerous to foresee. National Car Rental likewise recognizes the possibility that some applications of the law of contract could interfere with the attainment of national objectives and therefore come within the domain of § 301(a). But general enforcement of shrinkwrap licenses of the kind before us does not create such interference.

Aronson emphasized that enforcement of the contract between Aronson and Quick Point Pencil Company would not withdraw any information from the public domain. That is equally true of the contract between ProCD and Zeidenberg. Everyone remains free to copy and disseminate all 3,000 telephone books that have been incorporated into ProCD's database. Anyone can add sic codes and zip codes. ProCD's rivals have done so. Enforcement of the shrinkwrap license may even make information more readily available, by reducing the price ProCD charges to consumer buyers. To the extent licenses facilitate distribution of object code while concealing the source code (the point of a clause forbidding disassembly), they serve the same procompetitive functions as does the law of trade secrets. Rockwell Graphic Systems, Inc. v. DEV Industries, Inc., 925 F.2d 174, 180 (7th Cir. 1991). Licenses may have other benefits for consumers: many licenses permit users to make extra copies, to use the software on multiple computers, even to incorporate the software into the user's products. But whether a particular license is generous or restrictive, a simple two-party contract is not "equivalent to any of the exclusive rights within the general scope of copyright" and therefore may be enforced.

REVERSED AND REMANDED

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United States District Court,S.D. New York.

Christopher Specht v. Netscape Communications Corp

Nos. 00 CIV. 4871(AKH), 00 CIV. 6219(AKH), 00 CIV. 6249(AKH).

July 5, 2001.

MEMORANDUM AND ORDER DENYING MOTION TO COMPEL ARBITRATION AND STAY

PROCEEDINGS

Hellerstein, District Judge.

Promises become binding when there is a meeting of the minds and consideration is exchanged. So it was at King's Bench in common law England; so it was under the common law in the American colonies; so it was through more than two centuries of jurisprudence in this country; and so it is today. Assent may be registered by a signature, a handshake, or a click of a computer mouse transmitted across the invisible ether of the Internet. Formality is not a requisite; any sign, symbol or action, or even willful inaction, as long as it is unequivocally referable to the promise, may create a contract.

The three related cases before me all involve this timeless issue of assent, but in the context of free software offered on the Internet. If an offeree downloads free software, and the offeror seeks a contractual understanding limiting its uses and applications, under what circumstances does the act of downloading create a contract? On the facts presented here, is there the requisite assent and consideration? My decision focuses on these issues.

In these putative class actions, Plaintiffs allege that usage of the software transmits to Defendants private information about the user's file transfer activity on the Internet, thereby effecting an electronic surveillance of the user's activity in violation of two federal statutes, the Electronic Communications Privacy Act, 18 U.S.C. § 2510 et seq., and the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. Defendants move to compel arbitration and stay the proceedings, arguing that the disputes reflected in the Complaint, like all others relating to use of the software, are subject to a binding arbitration clause in the End User License Agreement ("License Agreement"), the contract allegedly made by the offeror of the software and the party effecting the download. Thus, I am asked to decide if an offer of a license agreement, made independently of freely offered software and not expressly accepted by a user of that software, nevertheless binds the user to an arbitration clause contained in the license.

I. Factual and Procedural Background

Defendant Netscape, [FN2] a provider of computer software programs that enable and facilitate the use of the Internet, offers its "SmartDownload" software

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free of charge on its web site to all those who visit the site and indicate, by clicking their mouse in a designated box, that they wish to obtain it. SmartDownload is a program that makes it easier for its users to download files from the Internet without losing their interim progress when they pause to engage in some other task, or if their Internet connection is severed. Four of the six named Plaintiffs--John Gibson, Mark Gruber, Sean Kelly and Sherry Weindorf--selected and clicked in the box indicating a decision to obtain the software, and proceeded to download the software on to the hard drives of their computers. The fifth named Plaintiff, Michael Fagan, allegedly downloaded the software from a "shareware" [FN3] web site operated by a third party. The sixth named Plaintiff, Christopher Specht, never obtained or used SmartDownload, but merely maintained a web site from which other individuals could download files. [FN4]

FN2. Defendant American Online, Inc. ("AOL") is Defendant Netscape's corporate parent.

FN3. Various companies and individuals maintain "shareware" web sites containing libraries of free, publicly available software. The ZDNet site library included SmartDownload. The pages that a user would see in downloading SmartDownload from ZDNet, however, differ from the pages that a user would see in downloading SmartDownload directly from the Netscape web site. Notably, there is no reference to the License Agreement on the ZDNet pages, merely a hypertext link to "more information" about SmartDownload, which, if clicked, takes the user to a Netscape web page which, in turn, contains a link to the License Agreement. In other words, an individual could obtain SmartDownload from ZDNet without ever seeing a reference to the License Agreement, even if he or she viewed all of ZDNet's web pages.

FN4. As discussed infra, Defendants contend that because other individuals could use SmartDownload to facilitate their downloading of files from Specht's web site, Specht is a third-party beneficiary of the License Agreement.

Visitors wishing to obtain SmartDownload from Netscape's web site arrive at a page pertaining to the download of the software. On this page, there appears a tinted box, or button, labeled "Download." By clicking on the box, a visitor initiates the download. The sole reference on this page to the License Agreement appears in text that is visible only if a visitor scrolls down through the page to the next screen. If a visitor does so, he or she sees the following invitation to review the License Agreement:

Please review and agree to the terms of the Netscape SmartDownload software license agreement before downloading and using the software.

Visitors are not required affirmatively to indicate their assent to the License Agreement, or even to view the license agreement, before proceeding with a

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download of the software. But if a visitor chooses to click on the underlined text in the invitation, a hypertext link takes the visitor to a web page entitled "License & Support Agreements." The first paragraph on this page reads in pertinent part:

The use of each Netscape software product is governed by a license agreement. You must read and agree to the license agreement terms BEFORE acquiring a product. Please click on the appropriate link below to review the current license agreement for the product of interest to you before acquisition. For products available for download, you must read and agree to the license agreement terms BEFORE you install the software. If you do not agree to the license terms, do not download, install or use the software.

Below the paragraph appears a list of license agreements, the first of which is "License Agreement for Netscape Navigator and Netscape Communicator Product Family (Netscape Navigator, Netscape Communicator and Netscape SmartDownload)." If the visitor then clicks on that text, he or she is brought to another web page, this one containing the full text of the License Agreement.

The License Agreement, which has been unchanged throughout the period that Netscape has made SmartDownload available to the public, grants the user a license to use and reproduce SmartDownload, and otherwise contains few restrictions on the use of the software. The first paragraph of the License Agreement describes, in upper case print, the purported manner in which a user accepts or rejects its terms.

BY CLICKING THE ACCEPTANCE BUTTON OR INSTALLING OR USING NETSCAPE COMMUNICATOR, NETSCAPE NAVIGATOR, OR NETSCAPE SMARTDOWNLOAD SOFTWARE (THE "PRODUCT"), THE INDIVIDUAL OR ENTITY LICENSING THE PRODUCT ("LICENSEE") IS CONSENTING TO BE BOUND BY AND IS BECOMING A PARTY TO THIS AGREEMENT. IF LICENSEE DOES NOT AGREE TO ALL OF THE TERMS OF THIS AGREEMENT, THE BUTTON INDICATING NON-ACCEPTANCE MUST BE SELECTED, AND LICENSEE MUST NOT INSTALL OR USE THE SOFTWARE.

The License Agreement also contains a term requiring that virtually all disputes be submitted to arbitration in Santa Clara County, California.

Unless otherwise agreed in writing, all disputes relating to this Agreement (excepting any dispute relating to intellectual property rights) shall be subject to final and binding arbitration in Santa Clara County, California, under the auspices of JAMS/EndDispute, with the losing party paying all costs of arbitration.

All users of SmartDownload must use it in connection with Netscape's Internet browser, which may be obtained either as an independent product, Netscape Navigator, or as part of a suite of software, Netscape Communicator. Navigator and Communicator are governed by a single license agreement, which is identical to the License Agreement for SmartDownload. By its terms, the Navigator / Communicator license is limited to disputes "relating to this Agreement."

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II. Applicable Law

. . . First, I must determine whether the parties entered into a binding contract. Only if I conclude that a contract exists do I proceed to a second stage of analysis: interpretation of the arbitration clause and its applicability to the present case. The first stage of the analysis--whether a contract was formed--is a question of state law. If, under the law, a contract is formed, the interpretation of the scope of an arbitration clause in the contract is a question of federal law. . . .

[The court determines that California law applies to the question of whether a contract was formed.]

III. Did Plaintiffs Consent to Arbitration?

Unless the Plaintiffs agreed to the License Agreement, they cannot be bound by the arbitration clause contained therein. My inquiry, therefore, focuses on whether the Plaintiffs, through their acts or failures to act, manifested their assent to the terms of the License Agreement proposed by Defendant Netscape. More specifically, I must consider whether the web site gave Plaintiffs sufficient notice of the existence and terms of the License Agreement, and whether the act of downloading the software sufficiently manifested Plaintiffs' assent to be bound by the License Agreement. I will address separately the factually distinct circumstances of Plaintiffs Michael Fagan and Christopher Specht.

In order for a contract to become binding, both parties must assent to be bound. "[C]ourts have required that assent to the formation of a contract be manifested in some way, by words or other conduct, if it is to be effective." E. Allan Farnsworth, Farnsworth on Contracts § 3.1 (2d ed.2000). "To form a contract, a manifestation of mutual assent is necessary. Mutual assent may be manifested by written or spoken words, or by conduct." Binder v. Aetna Life Ins. Co., 75 Cal.App.4th 832, 850, 89 Cal.Rptr.2d 540, 551 (Cal.Ct.App.1999) (citations omitted). "A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." Cal. Com.Code § 2204.

These principles enjoy continuing vitality in the realm of software licensing. The sale of software, in stores, by mail, and over the Internet, has resulted in several specialized forms of license agreements. For example, software commonly is packaged in a container or wrapper that advises the purchaser that the use of the software is subject to the terms of a license agreement contained inside the package. The license agreement generally explains that, if the purchaser does not wish to enter into a contract, he or she must return the product for a refund, and that failure to return it within a certain period will constitute assent to the license terms. These so-called "shrink-wrap licenses" have been the subject of considerable litigation.

In ProCD, Inc. v. Zeidenberg, for example, the Seventh Circuit Court of Appeals considered a software license agreement "encoded on the CD-ROM disks as

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well as printed in the manual, and which appears on a user's screen every time the software runs." 86 F.3d 1447, 1450 (7th Cir.1996). The absence of contract terms on the outside of the box containing the software was not material, since "[e]very box containing [the software] declares that the software comes with restrictions stated in an enclosed license." Id. The court accepted that placing all of the contract terms on the outside of the box would have been impractical, and held that the transaction, even though one "in which the exchange of money precedes the communication of detailed terms," was valid, in part because the software could not be used unless and until the offeree was shown the license and manifested his assent. Id. at 1451-52.

A vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance. And that is what happened. ProCD proposed a contract that a buyer would accept by using the software after having an opportunity to read the license at leisure. This Zeidenberg did. He had no choice, because the software splashed the license on the screen and would not let him proceed without indicating acceptance.

Id. at 1452 (emphasis added). The court concluded that "[s]hrinkwrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general (for example, if they violate a rule of positive law, or if they are unconscionable)." Id. at 1449. [FN9]

FN9. In a breach-of-warranty suit involving software, the Supreme Court of Washington, en banc, enforced a license agreement that, like the agreement at issue in ProCD, was presented on the user's computer screen each time the software was used, and also was located on the outside of each diskette pouch and on the inside cover of the instruction manuals. See M.A. Mortenson Co., Inc. v. Timberline Software Corp., 140 Wash.2d 568, 998 P.2d 305 (Wash.2000).

The Seventh Circuit expanded this holding in Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir.1997), cert. denied, 522 U.S. 808, 118 S.Ct. 47, 139 L.Ed.2d 13 (1997). In Hill, a customer ordered a computer by telephone; the computer arrived in a box also containing license terms, including an arbitration clause, "to govern unless the customer return[ed] the computer within 30 days." Id. at 1148. The customer was not required to view or expressly assent to these terms before using the computer. More than 30 days later, the customer brought suit based in part on Gateway's warranty in the license agreement, and Gateway petitioned to compel arbitration. The court held that the manufacturer, Gateway, "may invite acceptance by conduct," and that "[b]y keeping the computer beyond 30 days, the Hills accepted Gateway's offer, including the arbitration clause." Id. at 1149, 1150. [FN10] Although not mentioned in the decision, the customer, by seeking to take advantage of the warranty provisions contained in the license agreement, thus could be fairly charged with the arbitration clause as well. It bears noting that unlike the plaintiffs in Hill and Brower, who grounded their claims on express

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warranties contained in the contracts, the Plaintiffs in this case base their claims on alleged privacy rights independent of the License Agreement for SmartDownload.

FN10. See also Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 676 N.Y.S.2d 569 (N.Y.App.Div.1998) (in suit for breach of warranty, enforcing shrink-wrap license agreement identical to that in Hill ).

Not all courts to confront the issue have enforced shrink-wrap license agreements. In Klocek v. Gateway, Inc., the court considered a standard shrink-wrap license agreement that was included in the box containing the computer ordered by the plaintiff. 104 F.Supp.2d 1332 (D.Kan.2000). The court held that Kansas and Missouri courts probably would not follow Hill or ProCD, supra. The court held that the computer purchaser was the offeror, and that the vendor accepted the purchaser's offer by shipping the computer in response to the offer. Under Section 2-207 of the Uniform Commercial Code, [FN11] the court held, the vendor's enclosure of the license agreement in the computer box constituted "[a] definite and seasonable expression of acceptance ... operat[ing] as an acceptance even though it state [d] terms additional to or different from those offered or agreed upon, unless acceptance [was] expressly made conditional on assent to the additional or different terms." Id. (quoting K.S.A. § 84-2-207). The court found that the vendor had not made acceptance of the license agreement a condition of the purchaser's acceptance of the computer, and that "the mere fact that Gateway shipped the goods with the terms attached did not communicate to plaintiff any unwillingness to proceed without plaintiff's agreement to the [license terms.]" Id. at 1340. Therefore, the court held, the plaintiff did not agree to the license terms and could not be compelled to arbitrate. Id. at 1341.

FN11. Although Section 2-207 of the Uniform Commercial Code, codified by Kansas at K.S.A. § 84-2-207, generally is invoked in a "battle of the forms," the Klocek court held that "nothing in [the] language [of Section 2-207] precludes application in a case which involves only one form." Id. at 1339 .

For most of the products it makes available over the Internet (but not SmartDownload), Netscape uses another common type of software license, one usually identified as "click-wrap" licensing. A click-wrap license presents the user with a message on his or her computer screen, requiring that the user manifest his or her assent to the terms of the license agreement by clicking on an icon. [FN12] The product cannot be obtained or used unless and until the icon is clicked. For example, when a user attempts to obtain Netscape's Communicator or Navigator, a web page appears containing the full text of the Communicator / Navigator license agreement. Plainly visible on the screen is the query, "Do you accept all the terms of the preceding license agreement? If so, click on the Yes button. If you select No, Setup will close." Below this text are three button or icons: one labeled "Back" and used to return to an earlier step of the download preparation; one labeled "No," which if clicked, terminates the download; and one labeled "Yes," which if clicked, allows the download to proceed. Unless the user clicks "Yes," indicating his or her assent to the license agreement, the user cannot obtain the software. The few courts that have had occasion to consider click-wrap contracts have held them

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to be valid and enforceable. See, e.g., In re RealNetworks, Inc. Privacy Litigation, No. 00C1366, 2000 WL 631341 (N.D.Ill. May 8, 2000); Hotmail Corp. v. Van$ Money Pie, Inc., No. C 98-20064, 1998 WL 388389 (N.D.Cal. April 16, 1998).

FN12. In this respect, click-wrap licensing is similar to the shrink-wrap license at issue in ProCD, supra, which appeared on the user's computer screen when the software was used and could not be bypassed until the user indicated acceptance of its terms. See ProCD, 86 F.3d at 1452 .

A third type of software license, "browse-wrap," was considered by a California federal court in Pollstar v. Gigmania Ltd., No. CIV-F-00-5671, 2000 WL 33266437 (E.D.Cal. Oct. 17, 2000). In Pollstar, the plaintiff's web page offered allegedly proprietary information. Notice of a license agreement appears on the plaintiff's web site. Clicking on the notice links the user to a separate web page containing the full text of the license agreement, which allegedly binds any user of the information on the site. However, the user is not required to click on an icon expressing assent to the license, or even view its terms, before proceeding to use the information on the site. The court referred to this arrangement as a "browse-wrap" license. The defendant allegedly copied proprietary information from the site. The plaintiff sued for breach of the license agreement, and the defendant moved to dismiss for lack of mutual assent sufficient to form a contract. The court, although denying the defendant's motion to dismiss, expressed concern about the enforceability of the browse-wrap license:

Viewing the web site, the court agrees with the defendant that many visitors to the site may not be aware of the license agreement. Notice of the license agreement is provided by small gray text on a gray background.... No reported cases have ruled on the enforceability of a browse wrap license.... While the court agrees with [the defendant] that the user is not immediately confronted with the notice of the license agreement, this does not dispose of [the plaintiff's] breach of contract claim. The court hesitates to declare the invalidity and unenforceability of the browse wrap license agreement at this time.

Id. at *5-6.

FN13. Judge Barbara Jones of this Court considered a similar license arrangement in Register.com v. Verio, Inc., 126 F.Supp.2d 238 (S.D.N.Y.2000) (Jones, J.). The plaintiff posted license terms on its web site, alongside a statement that "[b]y submitting this query [to the plaintiff's database], you agree to abide by these terms." Id. at 248. The court held that, "in light of this sentence at the end of Register.com' s terms of use, there can be no question that by proceeding to submit a [ ] query, Verio manifested its assent to be bound by Register.com's terms of use, and a contract was formed and subsequently breached." Id. Judge Jones was applying New York law. Id. at 241. Here, I am applying California law. But, whether under California or

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New York law, the promissee's assent to be bound is a required condition, and I find no such assent on the facts presented in this case.

The SmartDownload License Agreement in the case before me differs fundamentally from both click-wrap and shrink-wrap licensing, and resembles more the browse-wrap license of Pollstar. Where click-wrap license agreements and the shrink-wrap agreement at issue in ProCD require users to perform an affirmative action unambiguously expressing assent before they may use the software, that affirmative action is equivalent to an express declaration stating, "I assent to the terms and conditions of the license agreement" or something similar. For example, Netscape's Navigator will not function without a prior clicking of a box constituting assent. Netscape's SmartDownload, in contrast, allows a user to download and use the software without taking any action that plainly manifests assent to the terms of the associated license or indicates an understanding that a contract is being formed.

California courts carefully limit the circumstances under which a party may be bound to a contract. "[A]n offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.... This principle of knowing consent applies with particular force to provisions for arbitration." Windsor Mills, Inc. v. Collins & Aikman Corp., 25 Cal.App.3d 987, 993, 101 Cal.Rptr. 347 (Cal.Ct.App.1972). Accord Lawrence v. Walzer & Gabrielson, 207 Cal.App.3d 1501, 1507, 256 Cal.Rptr. 6 (Cal.Ct.App.1989); Cory v. Golden State Bank, 95 Cal.App.3d 360, 366, 157 Cal.Rptr. 538 (Cal.Ct.App.1979) .

Netscape argues that the mere act of downloading indicates assent. However, downloading is hardly an unambiguous indication of assent. The primary purpose of downloading is to obtain a product, not to assent to an agreement. In contrast, clicking on an icon stating "I assent" has no meaning or purpose other than to indicate such assent. Netscape's failure to require users of SmartDownload to indicate assent to its license as a precondition to downloading and using its software is fatal to its argument that a contract has been formed.

Furthermore, unlike the user of Netscape Navigator or other click-wrap or shrink-wrap licensees, the individual obtaining SmartDownload is not made aware that he is entering into a contract. SmartDownload is available from Netscape's web site free of charge. Before downloading the software, the user need not view any license agreement terms or even any reference to a license agreement, and need not do anything to manifest assent to such a license agreement other than actually taking possession of the product. From the user's vantage point, SmartDownload could be analogized to a free neighborhood newspaper, readily obtained from a sidewalk box or supermarket counter without any exchange with a seller or vender. It is there for the taking.

The only hint that a contract is being formed is one small box of text referring to the license agreement, text that appears below the screen used for downloading and that a user need not even see before obtaining the product:

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Please review and agree to the terms of the Netscape SmartDownload software license agreement before downloading and using the software.

Couched in the mild request, "Please review," this language reads as a mere invitation, not as a condition. The language does not indicate that a user must agree to the license terms before downloading and using the software. While clearer language appears in the License Agreement itself, the language of the invitation does not require the reading of those terms [FN14] or provide adequate notice either that a contract is being created or that the terms of the License Agreement will bind the user.

FN14. Defendants argue that this case resembles the situation where a party has failed to read a contract and is nevertheless bound by that contract. See, e.g., Powers v. Dickson, Carlson & Campillo, 54 Cal.App.4th 1102, 1109, 63 Cal.Rptr.2d 261 (Cal.Ct.App.1997); Rowland v. PaineWebber Inc., 4 Cal.App.4th 279, 287, 6 Cal.Rptr.2d 20 (Cal.Ct.App.1992). This argument misses the point. The question before me is whether the parties have first bound themselves to the contract. If they have unequivocally agreed to be bound, the contract is enforceable whether or not they have read its terms.

The case law on software licensing has not eroded the importance of assent in contract formation. Mutual assent is the bedrock of any agreement to which the law will give force. Defendants' position, if accepted, would so expand the definition of assent as to render it meaningless. Because the user Plaintiffs did not assent to the license agreement, they are not subject to the arbitration clause contained therein and cannot be compelled to arbitrate their claims against the Defendants.

Defendants further contend that even if the arbitration clause in the SmartDownload License Agreement is not binding, the license agreement applicable to Netscape Communicator and Navigator applies to this dispute. As discussed earlier, the Communicator and Navigator agreement is a conventional click-wrap contract; it prevents any use of the software unless and until the user clicks an icon stating his or her assent to the terms of the license. The agreement contains a clause requiring arbitration of "all disputes relating to this Agreement." Assuming arguendo that it is enforceable, the Communicator / Navigator license agreement is a separate contract governing a separate transaction; it makes no mention of SmartDownload. Plaintiffs' allegations involve an aspect of SmartDownload that allegedly transmits private information about Plaintiffs' online activities to Defendants. These claims do not implicate Communicator or Navigator any more than they implicate the use of other software on Plaintiffs' computers. Resolution of this dispute does not require interpretation of the parties' rights or obligations under the license agreement for Netscape Communicator and Navigator. Defendants were free to craft broader language for the Communicator / Navigator license, explicitly making later applications such as SmartDownload subject to that click-wrap agreement. They did not do so. Therefore, I reject Defendants' argument that the arbitration clauses in the Communicator and Navigator license agreements mandate arbitration of this dispute.

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Hoffa v. United States385 U.S. 293 (1966)

Mr. Justice STEWART delivered the opinion of the Court.Over a period of several weeks in the late autumn of 1962 there took

place in a federal court in Nashville, Tennessee, a trial by jury in which James Hoffa was charged with violating a provision of the Taft-Hartley Act. That trial, known in the present record as the Test Fleet trial, ended with a hung jury. The petitioners now before us—James Hoffa, Thomas Parks, Larry Campbell, and Ewing King—were tried and convicted in 1964 for endeavoring to bribe members of that jury. The convictions were affirmed by the Court of Appeals. A substantial element in the Government's proof that led to the convictions of these four petitioners was contributed by a witness named Edward Partin, who testified to several incriminating statements which he said petitioners Hoffa and King had made in his presence during the course of the Test Fleet trial. Our grant of certiorari was limited to the single issue of whether the Government's use in this case of evidence supplied by Partin operated to invalidate these convictions. 382 U.S. 1024, 86 S.Ct. 645, 15 L.Ed.2d 538.

The specific question before us, as framed by counsel for the petitioners, is this:

‘Whether evidence obtained by the Government by means of deceptively placing a secret informer in the quarters and councils of a defendant during one criminal trial so violates the defendant's Fourth, Fifth and Sixth Amendment rights that suppression of such evidence is required in a subsequent trial of the same defendant on a different charge.’

***

The controlling facts can be briefly stated. The Test Fleet trial, in which James Hoffa was the sole individual defendant, was in progress between October 22 and December 23, 1962, in Nashville, Tennessee. James Hoffa was president of the International Brotherhood of Teamsters. During the course of the trial he occupied a three-room suite in the Andrew Jackson Hotel in Nashville. One of his constant companions throughout the trial was the petitioner King, president of the Nashville local of the Teamsters Union. Edward Partin, a resident of Baton Rouge, Louisiana, and a local Teamsters Union official there, made repeated visits to Nashville during the period of the trial. On these visits he frequented the Hoffa hotel suite, and was continually in the company of Hoffa and his associates, including King, in and around the hotel suite, the hotel lobby, the courthouse, and elsewhere in Nashville. During this period Partin made frequent reports to a federal agent named Sheridan concerning conversations he said Hoffa and King had had with him and with each other, disclosing endeavors to bribe members of the

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Test Fleet jury. Partin's reports and his subsequent testimony at the petitioners' trial unquestionably contributed, directly or indirectly, to the convictions of all four of the petitioners.

The chain of circumstances which led Partin to be in Nashville during the Test Fleet trial extended back at least to September of 1962. At that time Partin was in jail in Baton Rouge on a state criminal charge. He was also under a federal indictment for embezzling union funds, and other indictments for state offenses were pending against him. Between that time and Partin's initial visit to Nashville on October 22 he was released on bail on the state criminal charge, and proceedings under the federal indictment were postponed. On October 8, Partin telephoned Hoffa in Washington, D.C., to discuss local union matters and Partin's difficulties with the authorities. In the course of this conversation Partin asked if he could see Hoffa to confer about these problems, and Hoffa acquiesced. Partin again called Hoffa on October 18 and arranged to meet him in Nashville. During this period Partin also consulted on several occasions with federal law enforcement agents, who told him that Hoffa might attempt to tamper with the Test Fleet jury, and asked him to be on the lookout in Nashville for such attempts and to report to the federal authorities any evidence of wrongdoing that he discovered. Partin agreed to do so.

After the Test Fleet trial was completed, Partin's wife received four monthly installment payments of $300 from government funds, and the state and federal charges against Partin were either dropped or not actively pursued.

Reviewing these circumstances in detail, the Government insists the fair inference is that Partin went to Nashville on his own initiative to discuss union business and his own problems with Hoffa, that Partin ultimately cooperated closely with federal authorities only after he discovered evidence of jury tampering in the Test Fleet trial, that the payments to Partin's wife were simply in partial reimbursement of Partin's subsequent out-of-pocket expenses, and that the failure to prosecute Partin on the state and federal charges had no necessary connection with his services as an informer. The findings of the trial court support this version of the facts, and these findings were accepted by the Court of Appeals as ‘supported by substantial evidence.’ 349 F.2d at 36. But whether or not the Government ‘placed’ Partin with Hoffa in Nashville during the Test Fleet trial, we proceed upon the premise that Partin was a government informer from the time he first arrived in Nashville on October 22, and that the Government compensated him for his services as such. It is upon that premise that we consider the constitutional issues presented.

Before turning to those issues we mention an additional preliminary contention of the Government. The petitioner Hoffa was the only individual defendant in the Test Fleet case, and Partin had conversations during the Test Fleet trial only with him and with the petitioner King. So far as appears, Partin never saw either of the other two petitioners during that period. Consequently, the Government argues that, of the four petitioners, only

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Hoffa has standing to raise a claim that his Sixth Amendment right to counsel in the Test Fleet trial was impaired, and only he and King have standing with respect to the other constitutional claims. Cf. Wong Sun v. United States, 371 U.S. 471, 487—488, 491—492, 83 S.Ct. 407, 417—418, 419—420, 9 L.Ed.2d 441; Jones v. United States, 362 U.S. 257, 259—267, 80 S.Ct. 725, 730—734, 4 L.Ed.2d 697. It is clear, on the other hand, that Partin's reports to the agent Sheridan uncovered leads that made possible the development of evidence against petitioners Parks and Campbell. But we need not pursue the nuances of these ‘standing’ questions, because it is evident in any event that none of the petitioners can prevail unless the petitioner Hoffa prevails. For that reason, the ensuing discussion is confined to the claims of the petitioner Hoffa (hereinafter petitioner), all of which he clearly has standing to invoke.

I.It is contended that only by violating the petitioner's rights under the

Fourth Amendment was Partin able to hear the petitioner's incriminating statements in the hotel suite, and that Partin's testimony was therefore inadmissible under the exclusionary rule of Weeks v. United States, 232 U.S. 383, 34 S.Ct. 341, 58 L.Ed. 652. The argument is that Partin's failure to disclose his role as a government informer vitiated the consent that the petitioner gave to Partin's repeated entries into the suite, and that by listening to the petitioner's statements Partin conducted an illegal ‘search’ for verbal evidence.

The preliminary steps of this argument are on solid ground. A hotel room can clearly be the object of Fourth Amendment protection as much as a home or an office. United States v. Jeffers, 342 U.S. 48, 72 S.Ct. 93, 96 L.Ed. 59. The Fourth Amendment can certainly be violated by guileful as well as by forcible intrusions into a constitutionally protected area. Gouled v. United States, 255 U.S. 298, 41 S.Ct. 261, 65 L.Ed. 647. And the protections of the Fourth Amendment are surely not limited to tangibles, but can extend as well to oral statements. Silverman v. United States, 365 U.S. 505, 81 S.Ct. 679, 5 L.Ed.2d 734.

Where the argument falls is in its misapprehension of the fundamental nature and scope of Fourth Amendment protection. What the Fourth Amendment protects is the security a man relies upon when he places himself or his property within a constitutionally protected area, be it his home or his office, his hotel room or his automobile. There he is protected from unwarranted governmental intrusion. And when he puts something in his filing cabinet, in his desk drawer, or in his pocket, he has the right to know it will be secure from an unreasonable search or an unreasonable seizure. So it was that the Fourth Amendment could not tolerate the warrantless search of the hotel room in Jeffers, the purloining of the petitioner's private papers in Gouled, or the surreptitious electronic surveillance in Silverman. Countless other cases which have come to this Court over the years have involved a myriad of differing factual contexts in

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which the protections of the Fourth Amendment have been appropriately invoked. No doubt the future will bring countless others. By nothing we say here do we either foresee or foreclose factual situations to which the Fourth Amendment may be applicable.

In the present case, however, it is evident that no interest legitimately protected by the Fourth Amendment is involved. It is obvious that the petitioner was not relying on the security of his hotel suite when he made the incriminating statements to Partin or in Partin's presence. Partin did not enter the suite by force or by stealth. He was not a surreptitious eavesdropper. Partin was in the suite by invitation, and every conversation which he heard was either directed to him or knowingly carried on in his presence. The petitioner, in a word, was not relying on the security of the hotel room; he was relying upon his misplaced confidence that Partin would not reveal his wrongdoing. As counsel for the petitioner himself points out, some of the communications with Partin did not take place in the suite at all, but in the ‘hall of the hotel,’ in the ‘Andrew Jackson Hotel lobby,’ and ‘at the courthouse.’

Neither this Court nor any member of it has ever expressed the view that the Fourth Amendment protects a wrongdoer's misplaced belief that a person to whom he voluntarily confides his wrongdoing will not reveal it. Indeed, the Court unanimously rejected that very contention less than four years ago in Lopez v. United States, 373 US. 427, 83 S.Ct. 1381, 10 L.Ed.2d 462. In that case the petitioner had been convicted of attempted bribery of an internal revenue agent named Davis. The Court was divided with regard to the admissibility in evidence of a surreptitious electronic recording of an incriminating conversation Lopez had had in his private office with Davis. But there was no dissent from the view that testimony about the conversation by Davis himself was clearly admissible.

As the Court put it, ‘Davis was not guilty of an unlawful invasion of petitioner's office simply because his apparent willingness to accept a bribe was not real. Compare Wong Sun v. United States, 371 U.S. 471, 83 S.Ct. 407, 9 L.Ed.2d 441. He was in the office with petitioner's consent, and while there he did not violate the privacy of the office by seizing something surreptitiously without petitioner's knowledge. Compare Gouled v. United States, supra. The only evidence obtained consisted of statements made by Lopez to Davis, statements which Lopez knew full well could be used against him by Davis if he wished. * * *’ 373 U.S. at 438, 83 S.Ct. at 1387, 10 L.Ed.2d 462. In the words of the dissenting opinion in Lopez, ‘The risk of being overheard by an eavesdropper or betrayed by an informer or deceived as to the identity of one with whom one deals is probably inherent in the conditions of human society. It is the kind of risk we necessarily assume whenever we speak.’ Id., 373 U.S. at 465, 83 S.Ct. at 1402, 10 L.Ed.2d 462. See also Lewis v. United States, 385 U.S. 206, 87 S.Ct. 424, 17 L.Ed.2d 312.

Adhering to these views, we hold that no right protected by the Fourth Amendment was violated in the present case.

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****

Affirmed.

Charles Katz v. United States389 U.S. 347 (1967)

MR. JUSTICE STEWART delivered the opinion of the Court.The petitioner was convicted in the District Court for the Southern District

of California under an eight-count indictment charging him with transmitting wagering information by telephone from Los Angeles to Miami and Boston in violation of a federal statute.10 At trial the Government was permitted, over the petitioner's objection, to introduce evidence of the petitioner's end of telephone conversations, overheard by FBI agents who had attached an electronic listening and recording device to the outside of the public telephone booth from which he had placed his calls. In affirming his conviction, the Court of Appeals rejected the contention that the recordings had been obtained in violation of the Fourth Amendment, because ‘(t)here was no physical entrance into the area occupied by, (the petitioner).’ We granted certiorari in order to consider the constitutional questions thus presented.

We find no merit in the petitioner's further suggestion that his indictment must be dismissed. After his conviction was affirmed by the Court of Appeals, he testified before a federal grand jury concerning the charges involved here. Because he was compelled to testify pursuant to a grant of immunity,

10 18 U.S.C. s 1084. That statute provides in pertinent part:

‘(a) Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined no more than $10,000 or inprisoned not more than two years, or both.

‘(b) Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State where betting on that sporting event or contest is legal into a State in which such betting is legal.’

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48 Stat. 1096, as amended, 47 U.S.C. s 409(l), it is clear that the fruit of his testimony cannot be used against him in any future trial. But the petitioner asks for more. He contends that his conviction must be vacated and the charges against him dismissed lest he be ‘subjected to (a) penalty * * * on account of (a) * * * matter * * * concerning which he (was) compelled * * * to testify * * *.’ 47 U.S.C. s 409(l). Frank v. United States, 120 U.S.App.D.C. 392, 347 F.2d 486. We disagree. In relevant part, s 409(l) substantially repeats the language of the Compulsory Testimony Act of 1893, 27 Stat. 443, 49 U.S.C. s 46, which was Congress' response to this Court's statement that an immunity statute can supplant the Fifth Amendment privilege against self-incrimination only if it affords adequate protection from future prosecution or conviction. Counselman v. Hitchcock, 142 U.S. 547, 585-586, 12 S.Ct. 195, 206-207, 35 L.Ed. 1110. The statutory provision here involved was designed to provide such protection, see Brown v. United States, 359 U.S. 41, 45-46, 79 S.Ct. 539, 543-544, 3 L.Ed.2d 609, not to confer immunity from punishment pursuant to a prior prosecution and adjudication of guilt. Cf. Reina v. United States, 364 U.S. 507, 513-514, 81 S.Ct. 260, 264-265, 5 L.Ed.2d 249.

The petitioner had phrased those questions as follows:

‘A. Whether a public telephone booth is a constitutionally protected area so that evidence obtained by attaching an electronic listening recording device to the top of such a booth is obtained in violation of the right to privacy of the user of the booth.

‘B. Whether physical penetration of a constitutionally protected area is necessary before a search and seizure can be said to be violative of the Fourth Amendment to the United States Constitution.’

We decline to adopt this formulation of the issues. In the first place the correct solution of Fourth Amendment problems is not necessarily promoted by incantation of the phrase ‘constitutionally protected area.’ Secondly, the Fourth Amendment cannot be translated into a general constitutional ‘right to privacy.’ That Amendment protects individual privacy against certain kinds of governmental intrusion, but its protections go further, and often have nothing to do with privacy at all. Other provisions of the Constitution protect personal privacy from other forms of governmental invasion. But the protection of a person's general right to privacy—his right to be let alone by other people6—is, like the protection of his property and of his very life, left largely to the law of the individual States.

Because of the misleading way the issues have been formulated, the parties have attached great significance to the characterization of the telephone booth from which the petitioner placed his calls. The petitioner has

66 See Warren & Brandeis, The Right to Privacy, 4 Harv.L.Rev. 193 (1890).

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strenuously argued that the booth was a ‘constitutionally protected area.’ The Government has maintained with equal vigor that it was not. But this effort to decide whether or not a given ‘area,’ viewed in the abstract, is ‘constitutionally protected’ deflects attention from the problem presented by this case. For the Fourth Amendment protects people, not places. What a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection. But what he seeks to preserve as private, even in an area accessible to the public, may be constitutionally protected.

The Government stresses the fact that the telephone booth from which the petitioner made his calls was constructed partly of glass, so that he was as visible after he entered it as he would have been if he had remained outside. But what he sought to exclude when he entered the booth was not the intruding eye-it was the uninvited ear. He did not shed his right to do so simply because he made his calls from a place where he might be seen. No less than an individual in a business office, in a friend's apartment, or in a taxicab, a person in a telephone booth may rely upon the protection of the Fourth Amendment. One who occupies it, shuts the door behind him, and pays the toll that permits him to place a call is surely entitled to assume that the words he utters into the mouthpiece will not be broadcast to the world. To read the Constitution more narrowly is to ignore the vital role that the public telephone has come to play in private communication.

The Government contends, however, that the activities of its agents in this case should not be tested by Fourth Amendment requirements, for the surveillance technique they employed involved no physical penetration of the telephone booth from which the petitioner placed his calls. It is true that the absence of such penetration was at one time thought to foreclose further Fourth Amendment inquiry, Olmstead v. United States, 277 U.S. 438, 457, 464, 466, 48 S.Ct. 564, 565, 567, 568, 72 L.Ed. 944; Goldman v. United States, 316 U.S. 129, 134-136, 62 S.Ct. 993, 995-997, 86 L.Ed. 1322, for that Amendment was thought to limit only searches and seizures of tangible property. But ‘(t)he premise that property interests control the right of the Government to search and seize has been discredited.’   Warden, Md. Penitentiary v. Hayden, 387 U.S. 294, 304, 87 S.Ct. 1642, 1648, 18 L.Ed.2d 782. Thus, although a closely divided Court supposed in Olmstead that surveillance without any trespass and without the seizure of any material object fell outside the ambit of the Constitution, we have since departed from the narrow view on which that decision rested. Indeed, we have expressly held that the Fourth Amendment governs not only the seizure of tangible items, but extends as well to the recording of oral statements overheard without any ‘technical trespass under * * * local property law.’ Silverman v. United States, 365 U.S. 505, 511, 81 S.Ct. 679, 682, 5 L.Ed.2d 734. Once this much is acknowledged, and once it is recognized that the Fourth Amendment protects people—and not simply ‘areas'—against unreasonable searches and seizures it becomes clear that the reach of that Amendment cannot turn upon the presence or absence of a physical

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intrusion into any given enclosure.We conclude that the underpinnings of Olmstead and Goldman have been

so eroded by our subsequent decisions that the ‘trespass' doctrine there enunciated can no longer be regarded as controlling. The Government's activities in electronically listening to and recording the petitioner's words violated the privacy upon which he justifiably relied while using the telephone booth and thus constituted a ‘search and seizure’ within the meaning of the Fourth Amendment. The fact that the electronic device employed to achieve that end did not happen to penetrate the wall of the booth can have no constitutional significance.

The question remaining for decision, then, is whether the search and seizure conducted in this case complied with constitutional standards. In that regard, the Government's position is that its agents acted in an entirely defensible manner: They did not begin their electronic surveillance until investigation of the petitioner's activities had established a strong probability that he was using the telephone in question to transmit gambling information to persons in other States, in violation of federal law. Moreover, the surveillance was limited, both in scope and in duration, to the specific purpose of establishing the contents of the petitioner's unlawful telephonic communications. The agents confined their surveillance to the brief periods during which he used the telephone booth,1414 and they took great care to overhear only the conversations of the petitioner himself.

Accepting this account of the Government's actions as accurate, it is clear that this surveillance was so narrowly circumscribed that a duly authorized magistrate, properly notified of the need for such investigation, specifically informed of the basis on which it was to proceed, and clearly apprised of the precise intrusion it would entail, could constitutionally have authorized, with appropriate safeguards, the very limited search and seizure that the Government asserts in fact took place. Only last Term we sustained the validity of such an authorization, holding that, under sufficiently ‘precise and discriminate circumstances,’ a federal court may empower government agents to employ a concealed electronic device ‘for the narrow and particularized purpose of ascertaining the truth of the * * * allegations' of a ‘detailed factual affidavit alleging the commission of a specific criminal offense.’ Osborn v. United States, 385 U.S. 323, 329-330, 87 S.Ct. 429, 433, 17 L.Ed.2d 394. Discussing that holding, the Court in Berger v. State of New York, 388 U.S. 41, 87 S.Ct. 1873, 18 L.Ed.2d 1040, said that ‘the order authorizing the use of the electronic device’ in Osborn ‘afforded similar

1414 Based upon their previous visual observations of the petitioner, the agents correctly predicted that he would use the telephone booth for several minutes at approximately the same time each morning. The petitioner was subjected to electronic surveillance only during this predetermined period. Six recordings, averaging some three minutes each, were obtained and admitted in evidence. They preserved the petitioner's end of conversations converning the placing of bets and the receipt of wagering information.

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protections to those * * * of conventional warrants authorizing the seizure of tangible evidence.’ Through those protections, ‘no greater invasion of privacy was permitted than was necessary under the circumstances.’ Id., at 57, 87 S.Ct. at 1882. Here, too, a similar judicial order could have accommodated ‘the legitimate needs of law enforcement by authorizing the carefully limited use of electronic surveillance.

The Government urges that, because its agents relied upon the decisions in Olmstead and Goldman, and because they did no more here than they might properly have done with prior judicial sanction, we should retroactively validate their conduct. That we cannot do. It is apparent that the agents in this case acted with restraint. Yet the inescapable fact is that this restraint was imposed by the agents themselves, not by a judicial officer. They were not required, before commencing the search, to present their estimate of probable cause for detached scrutiny by a neutral magistrate. They were not compelled, during the conduct of the search itself, to observe precise limits established in advance by a specific court order. Nor were they directed, after the search had been completed, to notify the authorizing magistrate in detail of all that had been seized. In the absence of such safeguards, this Court has never sustained a search upon the sole ground that officers reasonably expected to find evidence of a particular crime and voluntarily confined their activities to the least intrusive means consistent with that end. Searches conducted without warrants have been held unlawful ‘notwithstanding facts unquestionably showing probable cause,’ Agnello v. United States, 269 U.S. 20, 33, 46 S.Ct. 4, 6, 70 L.Ed. 145, for the Constitution requires ‘that the deliberate, impartial judgment of a judicial officer * * * be interposed between the citizen and the police * * *.’ Wong Sun v. United States, 371 U.S. 471, 481-482, 83 S.Ct. 407, 414, 9 L.Ed.2d 441. ‘Over and again this Court has emphasized that the mandate of the (Fourth) Amendment requires adherence to judicial processes,’ United States v. Jeffers, 342 U.S. 48, 51, 72 S.Ct. 93, 95, 96 L.Ed. 59, and that searches conducted outside the judicial process, without prior approval by judge or magistrate, are per se unreasonable under the Fourth Amendment—subject only to a few specifically established and well-delineated exceptions.

It is difficult to imagine how any of those exceptions could ever apply to the sort of search and seizure involved in this case. Even electronic surveillance substantially contemporaneous with an individual's arrest could hardly be deemed an ‘incident’ of that arrest. Nor could the use of electronic surveillance without prior authorization be justified on grounds of ‘hot pursuit. And, of course, the very nature of electronic surveillance precludes its use pursuant to the suspect's consent.

The Government does not question these basic principles. Rather, it urges the creation of a new exception to cover this case. It argues that surveillance of a telephone booth should be exempted from the usual requirement of advance authorization by a magistrate upon a showing of probable cause. We cannot agree. Omission of such authorization ‘bypasses the safeguards provided by an objective predetermination of probable cause, and

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substitutes instead the far less reliable procedure of an after-the-event justification for the * * * search, too likely to be subtly influenced by the familiar shortcomings of hindsight judgment.’ Beck v. State of Ohio, 379 U.S. 89, 96, 85S.Ct. 223, 228, 13 L.Ed.2d 142.

And bypassing a neutral predetermination of the scope of a search leaves individuals secure from Fourth Amendment violations ‘only in the discretion of the police.’ Id., at 97, 85 S.Ct. at 229.

These considerations do not vanish when the search in question is transferred from the setting of a home, an office, or a hotel room to that of a telephone booth. Wherever a man may be, he is entitled to know that he will remain free from unreasonable searches and seizures. The government agents here ignored ‘the procedure of antecedent justification * * * that is central to the Fourth Amendment,' a procedure that we hold to be a constitutional precondition of the kind of electronic surveillance involved in this case. Because the surveillance here failed to meet that condition, and because it led to the petitioner's conviction, the judgment must be reversed.

It is so ordered.Judgment reversed.

*****

Mr. Justice HARLAN, concurring.I join the opinion of the Court, which I read to hold only (a) that an

enclosed telephone booth is an area where, like a home, a person has a constitutionally protected reasonable expectation of privacy; (b) that electronic as well as physical intrusion into a place that is in this sense private may constitute a violation of the Fourth Amendment;and (c) that the invasion of a constitutionally protected area by federal authorities is, as the Court has long held, presumptively unreasonable in the absence of a search warrant.

As the Court's opinion states, ‘the Fourth Amendment protects people, not places.’ The question, however, is what protection it affords to those people. Generally, as here, the answer to that question requires reference to a ‘place.’ My understanding of the rule that has emerged from prior decisions is that there is a twofold requirement, first that a person have exhibited an actual (subjective) expectation of privacy and, second, that the expectation be one that society is prepared to recognize as ‘reasonable.’ Thus a man's home is, for most purposes, a place where he expects privacy, but objects, activities, or statements that he exposes to the ‘plain view’ of outsiders are not ‘protected’ because no intention to keep them to himself has been exhibited. On the other hand, conversations in the open would not be protected against being overheard, for the expectation of privacy under the circumstances would be unreasonable.

The critical fact in this case is that ‘(o)ne who occupies it, (a telephone booth) shuts the door behind him, and pays the toll that permits him to place a call is surely entitled to assume’ that his conversation is not being

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intercepted. Ante, at 511. The point is not that the booth is ‘accessible to the public’ at other times, ante, at 511, but that it is a temporarily private place whose momentary occupants' expectations of freedom from intrusion are recognized as reasonable.

In Silverman v. United States, 365 U.S. 505, 81 S.Ct. 679, 5 L.Ed.2d 734, we held that eavesdropping accomplished by means of an electronic device that penetrated the premises occupied by petitioner was a violation of the Fourth Amendment. That case established that interception of conversations reasonably intended to be private could constitute a ‘search and seizure,’ and that the examination or taking of physical property was not required. This view of the Fourth Amendment was followed in Wong Sun v.United States, 371 U.S. 471, at 485, 83 S.Ct. 407, at 416, 9 L.Ed.2d 441, and Berger v. State of New York, 388 U.S. 41, at 51, 87 S.Ct. 1873, at 1879, 18 L.Ed.2d 1040. Also compare Osborne v. United States, 385 U.S. 323, at 327, 87 S.Ct. 429, at 431, 17 L.Ed.2d 394. In Silverman we found it unnecessary to re-examine Goldman v. United States, 316 U.S. 129, 62 S.Ct. 993, 86 L.Ed. 1322, which had held that electronic surveillance accomplished without the physical penetration of petitioner's premises by a tangible object did not violate the Fourth Amendment. This case requires us to reconsider Goldman, and I agree that it should now be overruled. Its limitation on Fourth Amendment protection is, in the present day, bad physics as well as bad law, for reasonable expectations of privacy may be defeated by electronic as well as physical invasion.

Finally, I do not read the Court's opinion to declare that no interception of a conversation one-half of which occurs in a public telephone booth can be reasonable in the absence of a warrant. As elsewhere under the Fourth Amendment, warrants are the general rule, to which the legitimate needs of law enforcement may demand specific exceptios. It will be time enough to consider any such exceptions when an appropriate occasion presents itself, and I agree with the Court that this is not one.

Danny Lee Kyllo v. United States533 U.S. 27 (2001)

Justice SCALIA delivered the opinion of the Court.This case presents the question whether the use of a thermal-imaging

device aimed at a private home from a public street to detect relative amounts of heat within the home constitutes a “search” within the meaning of the Fourth Amendment.

IIn 1991 Agent William Elliott of the United States Department of the

Interior came to suspect that marijuana was being grown in the home belonging to petitioner Danny Kyllo, part of a triplex on Rhododendron Drive in Florence, Oregon. Indoor marijuana growth typically requires high-

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intensity lamps. In order to determine whether an amount of heat was emanating from petitioner's home consistent with the use of such lamps, at 3:20 a.m. on January 16, 1992, Agent Elliott and Dan Haas used an Agema Thermovision 210 thermal imager to scan the triplex. Thermal imagers detect infrared radiation, which virtually all objects emit but which is not visible to the naked eye. The imager converts radiation into images based on relative warmth—black is cool, white is hot, shades of gray connote relative differences; in that respect, it operates somewhat like a video camera showing heat images. The scan of Kyllo's home took only a few minutes and was performed from the passenger seat of Agent Elliott's vehicle across the street from the front of the house and also from the street in back of the house. The scan showed that the roof over the garage and a side wall of petitioner's home were relatively hot compared to the rest of the home and substantially warmer than neighboring homes in the triplex. Agent Elliott concluded that petitioner was using halide lights to grow marijuana in his house, which indeed he was. Based on tips from informants, utility bills, and the thermal imaging, a Federal Magistrate Judge issued a warrant authorizing a search of petitioner's home, and the agents found an indoor growing operation involving more than 100 plants. Petitioner was indicted on one count of manufacturing marijuana, in violation of 21 U.S.C. § 841(a)(1). He unsuccessfully moved to suppress the evidence seized from his home and then entered a conditional guilty plea.

The Court of Appeals for the Ninth Circuit remanded the case for an evidentiary hearing regarding the intrusiveness of thermal imaging. On remand the District Court found that the Agema 210 “is a non-intrusive device which emits no rays or beams and shows a crude visual image of the heat being radiated from the outside of the house”; it “did not show any people or activity within the walls of the structure”; “[t]he device used cannot penetrate walls or windows to reveal conversations or human activities”; and “[n]o intimate details of the home were observed.” Supp.App. to Pet. for Cert. 39–40. Based on these findings, the District Court upheld the validity of the warrant that relied in part upon the thermal imaging, and reaffirmed its denial of the motion to suppress. A divided Court of Appeals initially reversed, 140 F.3d 1249 (1998), but that opinion was withdrawn and the panel (after a change in composition) affirmed, 190 F.3d 1041 (1999), with Judge Noonan dissenting. The court held that petitioner had shown no subjective expectation of privacy because he had made no attempt to conceal the heat escaping from his home, id., at 1046, and even if he had, there was no objectively reasonable expectation of privacy because the imager “did not expose any intimate details of Kyllo's life,” only “amorphous ‘hot spots' on the roof and exterior wall,” id., at 1047. We granted certiorari. 530 U.S. 1305, 121 S.Ct. 29, 147 L.Ed.2d 1052 (2000).

IIThe Fourth Amendment provides that “[t]he right of the people to be

secure in their persons, houses, papers, and effects, against unreasonable

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searches and seizures, shall not be violated.” “At the very core” of the Fourth Amendment “stands the right of a man to retreat into his own home and there be free from unreasonable governmental intrusion.” Silverman v. United States, 365 U.S. 505, 511, 81 S.Ct. 679, 5 L.Ed.2d 734 (1961). With few exceptions, the question whether a warrantless search of a home is reasonable and hence constitutional must be answered no.

On the other hand, the antecedent question whether or not a Fourth Amendment “search” has occurred is not so simple under our precedent.11 The permissibility of ordinary visual surveillance of a home used to be clear because, well into the 20th century, our Fourth Amendment jurisprudence was tied to common-law trespass. See, e.g., Goldman v. United States, 316 U.S. 129, 134–136, 62 S.Ct. 993, 86 L.Ed. 1322 (1942); Olmstead v. United States, 277 U.S. 438, 464–466, 48 S.Ct. 564, 72 L.Ed. 944 (1928). Cf. Silverman v. United States, supra, at 510–512, 81 S.Ct. 679 (technical trespass not necessary for Fourth Amendment violation; it suffices if there is “actual intrusion into a constitutionally protected area”). Visual surveillance was unquestionably lawful because “ ‘the eye cannot by the laws of England be guilty of a trespass.’ ” Boyd v. United States, 116 U.S. 616, 628, 6 S.Ct. 524, 29 L.Ed. 746 (1886) (quoting Entick v. Carrington, 19 How. St. Tr. 1029, 95 Eng. Rep. 807 (K.B.1765)). We have since decoupled violation of a person's Fourth Amendment rights from trespassory violation of his property, see Rakas v. Illinois, 439 U.S. 128, 143, 99 S.Ct. 421, 58 L.Ed.2d 387 (1978), but the lawfulness of warrantless visual surveillance of a home has still been preserved. As we observed in California v. Ciraolo, 476 U.S. 207, 213, 106 S.Ct. 1809, 90 L.Ed.2d 210 (1986), “[t]he Fourth Amendment protection of the home has never been extended to require law enforcement officers to shield their eyes when passing by a home on public thoroughfares.”

One might think that the new validating rationale would be that examining the portion of a house that is in plain public view, while it is a “search” despite the absence of trespass, is not an “unreasonable” one under the Fourth Amendment. See Minnesota v. Carter, 525 U.S. 83, 104, 119 S.Ct. 469, 142 L.Ed.2d 373 (1998) (BREYER, J., concurring in judgment). But in fact we have held that visual observation is no “search” at all—perhaps in order to preserve somewhat more intact our doctrine that warrantless searches are presumptively unconstitutional. See Dow Chemical Co. v. United States, 476 U.S. 227, 234–235, 239, 106 S.Ct. 1819, 90 L.Ed.2d 226 (1986). In assessing when a search is not a search, we have applied somewhat in reverse the principle first enunciated in Katz v. United States, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967). Katz involved eavesdropping by means of an electronic listening device placed on the

11 When the Fourth Amendment was adopted, as now, to “search” meant “[t]o look over or through for the purpose of finding something; to explore; to examine by inspection; as, to search the house for a book; to search the wood for a thief.” N. Webster, An American Dictionary of the English Language 66 (1828) (reprint 6th ed.1989).

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outside of a telephone booth—a location not within the catalog (“persons, houses, papers, and effects”) that the Fourth Amendment protects against unreasonable searches. We held that the Fourth Amendment nonetheless protected Katz from the warrantless eavesdropping because he “justifiably relied” upon the privacy of the telephone booth. Id., at 353, 88 S.Ct. 507. As Justice Harlan's oft-quoted concurrence described it, a Fourth Amendment search occurs when the government violates a subjective expectation of privacy that society recognizes as reasonable. See id., at 361, 88 S.Ct. 507. We have subsequently applied this principle to hold that a Fourth Amendment search does not occur—even when the explicitly protected location of a house is concerned—unless “the individual manifested a subjective expectation of privacy in the object of the challenged search,” and “society [is] willing to recognize that expectation as reasonable.” Ciraolo, supra, at 211, 106 S.Ct. 1809. We have applied this test in holding that it is not a search for the police to use a pen register at the phone company to determine what numbers were dialed in a private home, Smith v. Maryland, 442 U.S. 735, 743–744, 99 S.Ct. 2577, 61 L.Ed.2d 220 (1979), and we have applied the test on two different occasions in holding that aerial surveillance of private homes and surrounding areas does not constitute a search, Ciraolo, supra; Florida v. Riley, 488 U.S. 445, 109 S.Ct. 693, 102 L.Ed.2d 835 (1989).

The present case involves officers on a public street engaged in more than naked-eye surveillance of a home. We have previously reserved judgment as to how much technological enhancement of ordinary perception from such a vantage point, if any, is too much. While we upheld enhanced aerial photography of an industrial complex in Dow Chemical, we noted that we found “it important that this is not an area immediately adjacent to a private home, where privacy expectations are most heightened,” 476 U.S., at 237, n. 4, 106 S.Ct. 1819 (emphasis in original).

IIIIt would be foolish to contend that the degree of privacy secured to

citizens by the Fourth Amendment has been entirely unaffected by the advance of technology. For example, as the cases discussed above make clear, the technology enabling human flight has exposed to public view (and hence, we have said, to official observation) uncovered portions of the house and its curtilage that once were private. See Ciraolo, supra, at 215, 106 S.Ct. 1809. The question we confront today is what limits there are upon this power of technology to shrink the realm of guaranteed privacy.

The Katz test—whether the individual has an expectation of privacy that society is prepared to recognize as reasonable—has often been criticized as circular, and hence subjective and unpredictable. See 1 W. LaFave, Search and Seizure § 2.1(d), pp. 393–394 (3d ed.1996); Posner, The Uncertain Protection of Privacy by the Supreme Court, 1979 S.Ct. Rev. 173, 188; Carter, supra, at 97, 119 S.Ct. 469 (SCALIA, J., concurring). But see Rakas, supra, at 143–144, n. 12, 99 S.Ct. 421. While it may be difficult to

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refine Katz when the search of areas such as telephone booths, automobiles, or even the curtilage and uncovered portions of residences is at issue, in the case of the search of the interior of homes—the prototypical and hence most commonly litigated area of protected privacy—there is a ready criterion, with roots deep in the common law, of the minimal expectation of privacy that exists, and that is acknowledged to be reasonable. To withdraw protection of this minimum expectation would be to permit police technology to erode the privacy guaranteed by the Fourth Amendment. We think that obtaining by sense-enhancing technology any information regarding the interior of the home that could not otherwise have been obtained without physical “intrusion into a constitutionally protected area,” Silverman, 365 U.S., at 512, 81 S.Ct. 679, constitutes a search—at least where (as here) the technology in question is not in general public use. This assures preservation of that degree of privacy against government that existed when the Fourth Amendment was adopted. On the basis of this criterion, the information obtained by the thermal imager in this case was the product of a search.

The Government maintains, however, that the thermal imaging must be upheld because it detected “only heat radiating from the external surface of the house,” Brief for United States 26. The dissent makes this its leading point, see post, at 2047, contending that there is a fundamental difference between what it calls “off-the-wall” observations and “through-the-wall surveillance.” But just as a thermal imager captures only heat emanating from a house, so also a powerful directional microphone picks up only sound emanating from a house-and a satellite capable of scanning from many miles away would pick up only visible light emanating from a house. We rejected such a mechanical interpretation of the Fourth Amendment in Katz, where the eavesdropping device picked up only sound waves that reached the exterior of the phone booth. Reversing that approach would leave the homeowner at the mercy of advancing technology—including imaging technology that could discern all human activity in the home. While the technology used in the present case was relatively crude, the rule we adopt must take account of more sophisticated systems that are already in use or in development. The dissent's reliance on the distinction between “off-the-wall” and “through-the-wall” observation is entirely incompatible with the dissent's belief, which we discuss below, that thermal-imaging observations of the intimate details of a home are impermissible. The most sophisticated thermal-imaging devices continue to measure heat “off-the-wall” rather than “through-the-wall”; the dissent's disapproval of those more sophisticated thermal-imaging devices, see post, at 2051, is an acknowledgement that there is no substance to this distinction. As for the dissent's extraordinary assertion that anything learned through “an inference” cannot be a search, see post, at 2048–2049, that would validate even the “through-the-wall” technologies that the dissent purports to disapprove. Surely the dissent does not believe that the through-the-wall radar or ultrasound technology produces an 8–by–10 Kodak glossy that needs no analysis (i.e., the making of inferences). And, of course, the novel proposition that inference insulates a

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search is blatantly contrary to United States v. Karo, 468 U.S. 705, 104 S.Ct. 3296, 82 L.Ed.2d 530 (1984), where the police “inferred” from the activation of a beeper that a certain can of ether was in the home. The police activity was held to be a search, and the search was held unlawful.

The Government also contends that the thermal imaging was constitutional because it did not “detect private activities occurring in private areas,” Brief for United States 22. It points out that in Dow Chemical we observed that the enhanced aerial photography did not reveal any “intimate details.” 476 U.S., at 238, 106 S.Ct. 1819. Dow Chemical, however, involved enhanced aerial photography of an industrial complex, which does not share the Fourth Amendment sanctity of the home. The Fourth Amendment's protection of the home has never been tied to measurement of the quality or quantity of information obtained. In Silverman, for example, we made clear that any physical invasion of the structure of the home, “by even a fraction of an inch,” was too much, 365 U.S., at 512, 81 S.Ct. 679, and there is certainly no exception to the warrant requirement for the officer who barely cracks open the front door and sees nothing but the nonintimate rug on the vestibule floor. In the home, our cases show, all details are intimate details, because the entire area is held safe from prying government eyes. Thus, in Karo, supra, the only thing detected was a can of ether in the home; and in Arizona v. Hicks, 480 U.S. 321, 107 S.Ct. 1149, 94 L.Ed.2d 347 (1987), the only thing detected by a physical search that went beyond what officers lawfully present could observe in “plain view” was the registration number of a phonograph turntable. These were intimate details because they were details of the home, just as was the detail of how warm—or even how relatively warm—Kyllo was heating his residence.

Limiting the prohibition of thermal imaging to “intimate details” would not only be wrong in principle; it would be impractical in application, failing to provide “a workable accommodation between the needs of law enforcement and the interests protected by the Fourth Amendment,” Oliver v. United States, 466 U.S. 170, 181, 104 S.Ct. 1735, 80 L.Ed.2d 214 (1984). To begin with, there is no necessary connection between the sophistication of the surveillance equipment and the “intimacy” of the details that it observes—which means that one cannot say (and the police cannot be assured) that use of the relatively crude equipment at issue here will always be lawful. The Agema Thermovision 210 might disclose, for example, at what hour each night the lady of the house takes her daily sauna and bath—a detail that many would consider “intimate”; and a much more sophisticated system might detect nothing more intimate than the fact that someone left a closet light on. We could not, in other words, develop a rule approving only that through-the-wall surveillance which identifies objects no smaller than 36 by 36 inches, but would have to develop a jurisprudence specifying which home activities are “intimate” and which are not. And even when (if ever) that jurisprudence were fully developed, no police officer would be able to know in advance whether his through-the-wall surveillance picks up “intimate” details—and thus would be unable to know in advance whether it is

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constitutional.The dissent's proposed standard—whether the technology offers the

“functional equivalent of actual presence in the area being searched,” post, at 2050—would seem quite similar to our own at first blush. The dissent concludes that Katz was such a case, but then inexplicably asserts that if the same listening device only revealed the volume of the conversation, the surveillance would be permissible, post, at 2051. Yet if, without technology, the police could not discern volume without being actually present in the phone booth, Justice STEVENS should conclude a search has occurred. Cf. Karo, 468 U.S., at 735, 104 S.Ct. 3296 (STEVENS, J., concurring in part and dissenting in part) (“I find little comfort in the Court's notion that no invasion of privacy occurs until a listener obtains some significant information by use of the device .... A bathtub is a less private area when the plumber is present even if his back is turned”). The same should hold for the interior heat of the home if only a person present in the home could discern the heat. Thus the driving force of the dissent, despite its recitation of the above standard, appears to be a distinction among different types of information—whether the “homeowner would even care if anybody noticed,” post, at 2051. The dissent offers no practical guidance for the application of this standard, and for reasons already discussed, we believe there can be none. The people in their houses, as well as the police, deserve more precision.6

We have said that the Fourth Amendment draws “a firm line at the entrance to the house,” Payton, 445 U.S., at 590, 100 S.Ct. 1371. That line, we think, must be not only firm but also bright—which requires clear specification of those methods of surveillance that require a warrant. While it is certainly possible to conclude from the videotape of the thermal imaging that occurred in this case that no “significant” compromise of the homeowner's privacy has occurred, we must take the long view, from the original meaning of the Fourth Amendment forward.

“The Fourth Amendment is to be construed in the light of what was deemed an unreasonable search and seizure when it was adopted, and in a manner which will conserve public interests as well as the interests and rights of individual citizens.” Carroll v. United States, 267 U.S. 132, 149, 45 S.Ct. 280, 69 L.Ed. 543 (1925).

66 The dissent argues that we have injected potential uncertainty into the constitutional analysis by noting that whether or not the technology is in general public use may be a factor. See post, at 2050. That quarrel, however, is not with us but with this Court's precedent. See Ciraolo, supra, at 215, 106 S.Ct. 1809 (“In an age where private and commercial flight in the public airways is routine, it is unreasonable for respondent to expect that his marijuana plants were constitutionally protected from being observed with the naked eye from an altitude of 1,000 feet”). Given that we can quite confidently say that thermal imaging is not “routine,” we decline in this case to reexamine that factor.

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Where, as here, the Government uses a device that is not in general public use, to explore details of the home that would previously have been unknowable without physical intrusion, the surveillance is a “search” and is presumptively unreasonable without a warrant.

Since we hold the Thermovision imaging to have been an unlawful search, it will remain for the District Court to determine whether, without the evidence it provided, the search warrant issued in this case was supported by probable cause—and if not, whether there is any other basis for supporting admission of the evidence that the search pursuant to the warrant produced.

The judgment of the Court of Appeals is reversed; the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice STEVENS, with whom THE CHIEF JUSTICE, Justice O'CONNOR, and Justice KENNEDY join, dissenting.

There is, in my judgment, a distinction of constitutional magnitude between “through-the-wall surveillance” that gives the observer or listener direct access to information in a private area, on the one hand, and the thought processes used to draw inferences from information in the public domain, on the other hand. The Court has crafted a rule that purports to deal with direct observations of the inside of the home, but the case before us merely involves indirect deductions from “off-the-wall” surveillance, that is, observations of the exterior of the home. Those observations were made with a fairly primitive thermal imager that gathered data exposed on the outside of petitioner's home but did not invade any constitutionally protected interest in privacy. Moreover, I believe that the supposedly “bright-line” rule the Court has created in response to its concerns about future technological developments is unnecessary, unwise, and inconsistent with the Fourth Amendment.

I

There is no need for the Court to craft a new rule to decide this case, as it is controlled by established principles from our Fourth Amendment jurisprudence. One of those core principles, of course, is that “searches and seizures inside a home without a warrant are presumptively unreasonable.” Payton v. New York, 445 U.S. 573, 586, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980) (emphasis added). But it is equally well settled that searches and seizures of property in plain view are presumptively reasonable. See id., at 586–587, 100 S.Ct. 1371. Whether that property is residential or commercial, the basic principle is the same: “ ‘What a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection.’ ” California v. Ciraolo, 476 U.S. 207, 213, 106 S.Ct. 1809, 90 L.Ed.2d 210 (1986) (quoting Katz v. United States, 389 U.S. 347, 351, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967)); see Florida v. Riley, 488 U.S. 445, 449–

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450, 109 S.Ct. 693, 102 L.Ed.2d 835 (1989); California v. Greenwood, 486 U.S. 35, 40–41, 108 S.Ct. 1625, 100 L.Ed.2d 30 (1988); Dow Chemical Co. v. United States, 476 U.S. 227, 235–236, 106 S.Ct. 1819, 90 L.Ed.2d 226 (1986); Air Pollution Variance Bd. of Colo. v. Western Alfalfa Corp., 416 U.S. 861, 865, 94 S.Ct. 2114, 40 L.Ed.2d 607 (1974). That is the principle implicated here.

While the Court “take[s] the long view” and decides this case based largely on the potential of yet-to-be-developed technology that might allow “through-the-wall surveillance,” ante, at 2045–2046; see ante, at 2044, n. 3, this case involves nothing more than off-the-wall surveillance by law enforcement officers to gather information exposed to the general public from the outside of petitioner's home. All that the infrared camera did in this case was passively measure heat emitted from the exterior surfaces of petitioner's home; all that those measurements showed were relative differences in emission levels, vaguely indicating that some areas of the roof and outside walls were warmer than others. As still images from the infrared scans show, see Appendix, infra, no details regarding the interior of petitioner's home were revealed. Unlike an x-ray scan, or other possible “through-the-wall” techniques, the detection of infrared radiation emanating from the home did not accomplish “an unauthorized physical penetration into the premises,” Silverman v. United States, 365 U.S. 505, 509, 81 S.Ct. 679, 5 L.Ed.2d 734 (1961), nor did it “obtain information that it could not have obtained by observation from outside the curtilage of the house,” United States v. Karo, 468 U.S. 705, 715, 104 S.Ct. 3296, 82 L.Ed.2d 530 (1984).

Indeed, the ordinary use of the senses might enable a neighbor or passerby to notice the heat emanating from a building, particularly if it is vented, as was the case here. Additionally, any member of the public might notice that one part of a house is warmer than another part or a nearby building if, for example, rainwater evaporates or snow melts at different rates across its surfaces. Such use of the senses would not convert into an unreasonable search if, instead, an adjoining neighbor allowed an officer onto her property to verify her perceptions with a sensitive thermometer. Nor, in my view, does such observation become an unreasonable search if made from a distance with the aid of a device that merely discloses that the exterior of one house, or one area of the house, is much warmer than another. Nothing more occurred in this case.

Thus, the notion that heat emissions from the outside of a dwelling are a private matter implicating the protections of the Fourth Amendment (the text of which guarantees the right of people “to be secure in their ... houses” against unreasonable searches and seizures (emphasis added)) is not only unprecedented but also quite difficult to take seriously. Heat waves, like aromas that are generated in a kitchen, or in a laboratory or opium den, enter the public domain if and when they leave a building. A subjective expectation that they would remain private is not only implausible but also surely not “one that society is prepared to recognize as ‘reasonable.’ ” Katz,

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389 U.S., at 361, 88 S.Ct. 507 (Harlan, J., concurring).To be sure, the homeowner has a reasonable expectation of privacy

concerning what takes place within the home, and the Fourth Amendment's protection against physical invasions of the home should apply to their functional equivalent. But the equipment in this case did not penetrate the walls of petitioner's home, and while it did pick up “details of the home” that were exposed to the public, ante, at 2045, it did not obtain “any information regarding the interior of the home,” ante, at 2043 (emphasis added). In the Court's own words, based on what the thermal imager “showed” regarding the outside of petitioner's home, the officers “concluded” that petitioner was engaging in illegal activity inside the home. Ante, at 2041. It would be quite absurd to characterize their thought processes as “searches,” regardless of whether they inferred (rightly) that petitioner was growing marijuana in his house, or (wrongly) that “the lady of the house [was taking] her daily sauna and bath.” Ante, at 2045. In either case, the only conclusions the officers reached concerning the interior of the home were at least as indirect as those that might have been inferred from the contents of discarded garbage, see California v. Greenwood, 486 U.S. 35, 108 S.Ct. 1625, 100 L.Ed.2d 30 (1988), or pen register data, see Smith v. Maryland, 442 U.S. 735, 99 S.Ct. 2577, 61 L.Ed.2d 220 (1979), or, as in this case, subpoenaed utility records, see 190 F.3d 1041, 1043 (C.A.9 1999). For the first time in its history, the Court assumes that an inference can amount to a Fourth Amendment violation. See ante, at 2044–2045.

Notwithstanding the implications of today's decision, there is a strong public interest in avoiding constitutional litigation over the monitoring of emissions from homes, and over the inferences drawn from such monitoring. Just as “the police cannot reasonably be expected to avert their eyes from evidence of criminal activity that could have been observed by any member of the public,” Greenwood, 486 U.S., at 41, 108 S.Ct. 1625, so too public officials should not have to avert their senses or their equipment from detecting emissions in the public domain such as excessive heat, traces of smoke, suspicious odors, odorless gases, airborne particulates, or radioactive emissions, any of which could identify hazards to the community. In my judgment, monitoring such emissions with “sense-enhancing technology,” ante, at 2043, and drawing useful conclusions from such monitoring, is an entirely reasonable public service.

On the other hand, the countervailing privacy interest is at best trivial. After all, homes generally are insulated to keep heat in, rather than to prevent the detection of heat going out, and it does not seem to me that society will suffer from a rule requiring the rare homeowner who both intends to engage in uncommon activities that produce extraordinary amounts of heat, and wishes to conceal that production from outsiders, to make sure that the surrounding area is well insulated. Cf. United States v. Jacobsen, 466 U.S. 109, 122, 104 S.Ct. 1652, 80 L.Ed.2d 85 (1984) (“The concept of an interest in privacy that society is prepared to recognize as reasonable is, by its very nature, critically different from the mere expectation, however well

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justified, that certain facts will not come to the attention of the authorities”). The interest in concealing the heat escaping from one's house pales in significance to “the chief evil against which the wording of the Fourth Amendment is directed,” the “physical entry of the home,” United States v. United States Dist. Court for Eastern Dist. of Mich., 407 U.S. 297, 313, 92 S.Ct. 2125, 32 L.Ed.2d 752 (1972), and it is hard to believe that it is an interest the Framers sought to protect in our Constitution.

Since what was involved in this case was nothing more than drawing inferences from off-the-wall surveillance, rather than any “through-the-wall” surveillance, the officers' conduct did not amount to a search and was perfectly reasonable.

IIInstead of trying to answer the question whether the use of the thermal

imager in this case was even arguably unreasonable, the Court has fashioned a rule that is intended to provide essential guidance for the day when “more sophisticated systems” gain the “ability to ‘see’ through walls and other opaque barriers.” Ante, at 2044, and n. 3. The newly minted rule encompasses “obtaining [1] by sense-enhancing technology [2] any information regarding the interior of the home [3] that could not otherwise have been obtained without physical intrusion into a constitutionally protected area ... [4] at least where (as here) the technology in question is not in general public use.” Ante, at 2043 (internal quotation marks omitted). In my judgment, the Court's new rule is at once too broad and too narrow, and is not justified by the Court's explanation for its adoption. As I have suggested, I would not erect a constitutional impediment to the use of sense-enhancing technology unless it provides its user with the functional equivalent of actual presence in the area being searched.

Despite the Court's attempt to draw a line that is “not only firm but also bright,” ante, at 2046, the contours of its new rule are uncertain because its protection apparently dissipates as soon as the relevant technology is “in general public use,” ante, at 2043. Yet how much use is general public use is not even hinted at by the Court's opinion, which makes the somewhat doubtful assumption that the thermal imager used in this case does not satisfy that criterion. In any event, putting aside its lack of clarity, this criterion is somewhat perverse because it seems likely that the threat to privacy will grow, rather than recede, as the use of intrusive equipment becomes more readily available.

It is clear, however, that the category of “sense-enhancing technology” covered by the new rule, ibid., is far too broad. It would, for example, embrace potential mechanical substitutes for dogs trained to react when they sniff narcotics. But in United States v. Place, 462 U.S. 696, 707, 103 S.Ct. 2637, 77 L.Ed.2d 110 (1983), we held that a dog sniff that “discloses only the presence or absence of narcotics” does “not constitute a ‘search’ within the meaning of the Fourth Amendment,” and it must follow that

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sense-enhancing equipment that identifies nothing but illegal activity is not a search either. Nevertheless, the use of such a device would be unconstitutional under the Court's rule, as would the use of other new devices that might detect the odor of deadly bacteria or chemicals for making a new type of high explosive, even if the devices (like the dog sniffs) are “so limited both in the manner in which” they obtain information and “in the content of the information” they reveal. Ibid. If nothing more than that sort of information could be obtained by using the devices in a public place to monitor emissions from a house, then their use would be no more objectionable than the use of the thermal imager in this case.

The application of the Court's new rule to “any information regarding the interior of the home,” ante, at 2043, is also unnecessarily broad. If it takes sensitive equipment to detect an odor that identifies criminal conduct and nothing else, the fact that the odor emanates from the interior of a home should not provide it with constitutional protection. See supra, at 2050 and this page. The criterion, moreover, is too sweeping in that information “regarding” the interior of a home apparently is not just information obtained through its walls, but also information concerning the outside of the building that could lead to (however many) inferences “regarding” what might be inside. Under that expansive view, I suppose, an officer using an infrared camera to observe a man silently entering the side door of a house at night carrying a pizza might conclude that its interior is now occupied by someone who likes pizza, and by doing so the officer would be guilty of conducting an unconstitutional “search” of the home.

Because the new rule applies to information regarding the “interior” of the home, it is too narrow as well as too broad. Clearly, a rule that is designed to protect individuals from the overly intrusive use of sense-enhancing equipment should not be limited to a home. If such equipment did provide its user with the functional equivalent of access to a private place—such as, for example, the telephone booth involved in Katz, or an office building—then the rule should apply to such an area as well as to a home. See Katz, 389 U.S., at 351, 88 S.Ct. 507 (“[T]he Fourth Amendment protects people, not places”).

The final requirement of the Court's new rule, that the information “could not otherwise have been obtained without physical intrusion into a constitutionally protected area,” ante, at 2043 (internal quotation marks omitted), also extends too far as the Court applies it. As noted, the Court effectively treats the mental process of analyzing data obtained from external sources as the equivalent of a physical intrusion into the home. See supra, at 2048–2049. As I have explained, however, the process of drawing inferences from data in the public domain should not be characterized as a search.

The two reasons advanced by the Court as justifications for the adoption of its new rule are both unpersuasive. First, the Court suggests that its rule is compelled by our holding in Katz, because in that case, as in this, the surveillance consisted of nothing more than the monitoring of waves

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emanating from a private area into the public domain. See ante, at 2044. Yet there are critical differences between the cases. In Katz, the electronic listening device attached to the outside of the phone booth allowed the officers to pick up the content of the conversation inside the booth, making them the functional equivalent of intruders because they gathered information that was otherwise available only to someone inside the private area; it would be as if, in this case, the thermal imager presented a view of the heat-generating activity inside petitioner's home. By contrast, the thermal imager here disclosed only the relative amounts of heat radiating from the house; it would be as if, in Katz, the listening device disclosed only the relative volume of sound leaving the booth, which presumably was discernible in the public domain. Surely, there is a significant difference between the general and well-settled expectation that strangers will not have direct access to the contents of private communications, on the one hand, and the rather theoretical expectation that an occasional homeowner would even care if anybody noticed the relative amounts of heat emanating from the walls of his house, on the other. It is pure hyperbole for the Court to suggest that refusing to extend the holding of Katz to this case would leave the homeowner at the mercy of “technology that could discern all human activity in the home.” Ante, at 2044.

Second, the Court argues that the permissibility of “through-the-wall surveillance” cannot depend on a distinction between observing “intimate details” such as “the lady of the house [taking] her daily sauna and bath,” and noticing only “the nonintimate rug on the vestibule floor” or “objects no smaller than 36 by 36 inches.” Ante, at 2045–2046. This entire argument assumes, of course, that the thermal imager in this case could or did perform “through-the-wall surveillance” that could identify any detail “that would previously have been unknowable without physical intrusion.” Ante, at 2046. In fact, the device could not, see n. 1, supra, and did not, see Appendix, infra, enable its user to identify either the lady of the house, the rug on the vestibule floor, or anything else inside the house, whether smaller or larger than 36 by 36 inches. Indeed, the vague thermal images of petitioner's home that are reproduced in the Appendix were submitted by him to the District Court as part of an expert report raising the question whether the device could even take “accurate, consistent infrared images” of the outside of his house. Defendant's Exh. 107, p. 4. But even if the device could reliably show extraordinary differences in the amounts of heat leaving his home, drawing the inference that there was something suspicious occurring inside the residence—a conclusion that officers far less gifted than Sherlock Holmes would readily draw—does not qualify as “through-the-wall surveillance,” much less a Fourth Amendment violation.

IIIAlthough the Court is properly and commendably concerned about the

threats to privacy that may flow from advances in the technology available to the law enforcement profession, it has unfortunately failed to heed the

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tried and true counsel of judicial restraint. Instead of concentrating on the rather mundane issue that is actually presented by the case before it, the Court has endeavored to craft an all-encompassing rule for the future. It would be far wiser to give legislators an unimpeded opportunity to grapple with these emerging issues rather than to shackle them with prematurely devised constitutional constraints.

I respectfully dissent.

APPENDIX

Smith v. Maryland

442 U.S. 735 (1979)

Mr. Justice BLACKMUN delivered the opinion of the Court. This case presents the question whether the installation and use of a pen

register12 constitutes a “search” within the meaning of the Fourth 12 “A pen register is a mechanical device that records the numbers dialed on

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Amendment,13 made applicable to the States through the Fourteenth Amendment. Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081 (1961).

I On March 5, 1976, in Baltimore, Md., Patricia McDonough was robbed.

She gave the police a description of the robber and of a 1975 Monte Carlo automobile she had observed near the scene of the crime. Tr. 66–68. After the robbery, McDonough began receiving threatening and obscene phone calls from a man identifying himself as the robber. On one occasion, the caller asked that she step out on her front porch; she did so, and saw the 1975 Monte Carlo she had earlier described to police moving slowly past her home. Id., at 70. On March 16, police spotted a man who met McDonough's description driving a 1975 Monte Carlo in her neighborhood. Id., at 71–72. By tracing the license plate number, police learned that the car was registered in the name of petitioner, Michael Lee Smith. Id., at 72.

The next day, the telephone company, at police request, installed a pen register at its central offices to record the numbers dialed from the telephone at petitioner's home. Id., at 73, 75. The police did not get a warrant or court order before having the pen register installed. The register revealed that on March 17 a call was placed from petitioner's home to McDonough's phone. Id., at 74. On the basis of this and other evidence, the police obtained a warrant to search petitioner's residence. Id., at 75. The search revealed that a page in petitioner's phone book was turned down to the name and number of Patricia McDonough; the phone book was seized. Ibid. Petitioner was arrested, and a six-man lineup was held on March 19. McDonough identified petitioner as the man who had robbed her. Id., at 70–71.

Petitioner was indicted in the Criminal Court of Baltimore for robbery. By pretrial motion, he sought to suppress “all fruits derived from the pen register” on the ground that the police had failed to secure a warrant prior to a telephone by monitoring the electrical impulses caused when the dial on the telephone is released. It does not overhear oral communications and does not indicate whether calls are actually completed.” United States v. New York Tel. Co., 434 U.S. 159, 161 n. 1, 98 S.Ct. 364, 366 n. 1, 54 L.Ed.2d 376 (1977). A pen register is “usually installed at a central telephone facility [and] records on a paper tape all numbers dialed from [the] line” to which it is attached. United States v. Giordano, 416 U.S. 505, 549 n. 1, 94 S.Ct. 1820, 1842 n. 1, 40 L.Ed.2d 341 (1974) (opinion concurring in part and dissenting in part). See also United States v. New York Tel. Co., 434 U.S., at 162, 98 S.Ct., at 367.13 “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” U.S.Const., Amdt. 4

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its installation. Record 14; Tr. 54–56. The trial court denied the suppression motion, holding that the warrantless installation of the pen register did not violate the Fourth Amendment. Id., at 63. Petitioner then waived a jury, and the case was submitted to the court on an agreed statement of facts. Id., at 65–66. The pen register tape (evidencing the fact that a phone call had been made from petitioner's phone to McDonough's phone) and the phone book seized in the search of petitioner's residence were admitted into evidence against him. Id., at 74–76. Petitioner was convicted, id., at 78, and was sentenced to six years. He appealed to the Maryland Court of Special Appeals, but the Court of Appeals of Maryland issued a writ of certiorari to the intermediate court in advance of its decision in order to consider whether the pen register evidence had been properly admitted at petitioner's trial. 283 Md. 156, 160, 389 A.2d 858, 860 (1978).

The Court of Appeals affirmed the judgment of conviction, holding that “there is no constitutionally protected reasonable expectation of privacy in the numbers dialed into a telephone system and hence no search within the fourth amendment is implicated by the use of a pen register installed at the central offices of the telephone company.” Id., at 173, 389 A.2d, at 867. Because there was no “search,” the court concluded, no warrant was needed. Three judges dissented, expressing the view that individuals do have a legitimate expectation of privacy regarding the phone numbers they dial from their homes; that the installation of a pen register thus constitutes a “search”; and that, in the absence of exigent circumstances, the failure of police to secure a warrant mandated that the pen register evidence here be excluded. Id., at 174, 178, 389 A.2d, at 868, 870. Certiorari was granted in order to resolve indications of conflict in the decided cases as to the restrictions imposed by the Fourth Amendment on the use of pen registers. 439 U.S. 1001, 99 S.Ct. 609, 58 L.Ed.2d 676 (1978).

II

A The Fourth Amendment guarantees “[t]he right of the people to be

secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.” In determining whether a particular form of government-initiated electronic surveillance is a “search” within the meaning of the Fourth Amendment,4 our lodestar is Katz v. United States, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967). In Katz, Government agents had 44 In this case, the pen register was installed, and the numbers dialed were recorded, by the telephone company. Tr. 73–74. The telephone company, however, acted at police request. Id., at 73, 75. In view of this, respondent appears to concede that the company is to be deemed an “agent” of the police for purposes of this case, so as to render the installation and use of the pen register “state action” under the Fourth and Fourteenth Amendments. We may assume that “state action” was present here.

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intercepted the contents of a telephone conversation by attaching an electronic listening device to the outside of a public phone booth. The Court rejected the argument that a “search” can occur only when there has been a “physical intrusion” into a “constitutionally protected area,” noting that the Fourth Amendment “protects people, not places.” Id., at 351–353, 88 S.Ct., at 511–512. Because the Government's monitoring of Katz' conversation “violated the privacy upon which he justifiably relied while using the telephone booth,” the Court held that it “constituted a ‘search and seizure’ within the meaning of the Fourth Amendment.” Id., at 353, 88 S.Ct., at 512.

Consistently with Katz, this Court uniformly has held that the application of the Fourth Amendment depends on whether the person invoking its protection can claim a “justifiable,” a “reasonable,” or a “legitimate expectation of privacy” that has been invaded by government action. This inquiry, as Mr. Justice Harlan aptly noted in his Katz concurrence, normally embraces two discrete questions. The first is whether the individual, by his conduct, has “exhibited an actual (subjective) expectation of privacy,” 389 U.S., at 361, 88 S.Ct., at 516—whether, in the words of the Katz majority, the individual has shown that “he seeks to preserve [something] as private.” Id., at 351, 88 S.Ct., at 511. The second question is whether the individual's subjective expectation of privacy is “one that society is prepared to recognize as ‘reasonable,’ ” id., at 361, 88 S.Ct., at 516—whether, in the words of the Katz majority, the individual's expectation, viewed objectively, is “justifiable” under the circumstances. Id., at 353, 88 S.Ct., at 512.5

B In applying the Katz analysis to this case, it is important to begin by

specifying precisely the nature of the state activity that is challenged. The activity here took the form of installing and using a pen register. Since the pen register was installed on telephone company property at the telephone 55 Situations can be imagined, of course, in which Katz' two-pronged inquiry would provide an inadequate index of Fourth Amendment protection. For example, if the Government were suddenly to announce on nationwide television that all homes henceforth would be subject to warrantless entry, individuals thereafter might not in fact entertain any actual expectation or privacy regarding their homes, papers, and effects. Similarly, if a refugee from a totalitarian country, unaware of this Nation's traditions, erroneously assumed that police were continuously monitoring his telephone conversations, a subjective expectation of privacy regarding the contents of his calls might be lacking as well. In such circumstances, where an individual's subjective expectations had been “conditioned” by influences alien to well-recognized Fourth Amendment freedoms, those subjective expectations obviously could play no meaningful role in ascertaining what the scope of Fourth Amendment protection was. In determining whether a “legitimate expectation of privacy” existed in such cases, a normative inquiry would be proper.

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company's central offices, petitioner obviously cannot claim that his “property” was invaded or that police intruded into a “constitutionally protected area.” Petitioner's claim, rather, is that, notwithstanding the absence of a trespass, the State, as did the Government in Katz, infringed a “legitimate expectation of privacy” that petitioner held. Yet a pen register differs significantly from the listening device employed in Katz, for pen registers do not acquire the contents of communications. This Court recently noted:

“Indeed, a law enforcement official could not even determine from the use of a pen register whether a communication existed. These devices do not hear sound. They disclose only the telephone numbers that have been dialed—a means of establishing communication. Neither the purport of any communication between the caller and the recipient of the call, their identities, nor whether the call was even completed is disclosed by pen registers.” United States v. New York Tel. Co., 434 U.S. 159, 167, 98 S.Ct. 364, 369, 54 L.Ed.2d 376 (1977).

Given a pen register's limited capabilities, therefore, petitioner's argument that its installation and use constituted a “search” necessarily rests upon a claim that he had a “legitimate expectation of privacy” regarding the numbers he dialed on his phone.

This claim must be rejected. First, we doubt that people in general entertain any actual expectation of privacy in the numbers they dial. All telephone users realize that they must “convey” phone numbers to the telephone company, since it is through telephone company switching equipment that their calls are completed. All subscribers realize, moreover, that the phone company has facilities for making permanent records of the numbers they dial, for they see a list of their long-distance (toll) calls on their monthly bills. In fact, pen registers and similar devices are routinely used by telephone companies “for the purposes of checking billing operations, detecting fraud and preventing violations of law.” United States v. New York Tel. Co., 434 U.S., at 174–175, 98 S.Ct., at 373. Electronic equipment is used not only to keep billing records of toll calls, but also “to keep a record of all calls dialed from a telephone which is subject to a special rate structure.” Hodge v. Mountain States Tel. & Tel. Co., 555 F.2d 254, 266 (CA9 1977) (concurring opinion). Pen registers are regularly employed “to determine whether a home phone is being used to conduct a business, to check for a defective dial, or to check for overbilling.” Note, The Legal Constraints upon the Use of the Pen Register as a Law Enforcement Tool, 60 Cornell L.Rev. 1028, 1029 (1975) (footnotes omitted). Although most people may be oblivious to a pen register's esoteric functions, they presumably have some awareness of one common use: to aid in the identification of persons making annoying or obscene calls. See, e. g., Von Lusch v. C & P Telephone Co., 457 F.Supp. 814, 816 (Md.1978); Note, 60 Cornell L.Rev., at 1029–1030, n. 11; Claerhout, The Pen Register, 20 Drake L.Rev. 108, 110–111 (1970). Most phone books tell subscribers, on a page entitled “Consumer Information,” that the company “can frequently help in identifying to the authorities the

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origin of unwelcome and troublesome calls.” E. g., Baltimore Telephone Directory 21 (1978); District of Columbia Telephone Directory 13 (1978). Telephone users, in sum, typically know that they must convey numerical information to the phone company; that the phone company has facilities for recording this information; and that the phone company does in fact record this information for a variety of legitimate business purposes. Although subjective expectations cannot be scientifically gauged, it is too much to believe that telephone subscribers, under these circumstances, harbor any general expectation that the numbers they dial will remain secret.

Petitioner argues, however, that, whatever the expectations of telephone users in general, he demonstrated an expectation of privacy by his own conduct here, since he “us[ed] the telephone in his house to the exclusion of all others.” Brief for Petitioner 6 (emphasis added). But the site of the call is immaterial for purposes of analysis in this case. Although petitioner's conduct may have been calculated to keep the contents of his conversation private, his conduct was not and could not have been calculated to preserve the privacy of the number he dialed. Regardless of his location, petitioner had to convey that number to the telephone company in precisely the same way if he wished to complete his call. The fact that he dialed the number on his home phone rather than on some other phone could make no conceivable difference, nor could any subscriber rationally think that it would.

Second, even if petitioner did harbor some subjective expectation that the phone numbers he dialed would remain private, this expectation is not “one that society is prepared to recognize as ‘reasonable.’ ” Katz v. United States, 389 U.S., at 361, 88 S.Ct., at 516. This Court consistently has held that a person has no legitimate expectation of privacy in information he voluntarily turns over to third parties. E. g., United States v. Miller, 425 U.S., at 442–444, 96 S.Ct., at 1623–1624; Couch v. United States, 409 U.S., at 335–336, 93 S.Ct., at 619–620; United States v. White, 401 U.S., at 752, 91 S.Ct., at 1126 (plurality opinion); Hoffa v. United States, 385 U.S. 293, 302, 87 S.Ct. 408, 413, 17 L.Ed.2d 374 (1966); Lopez v. United States, 373 U.S. 427, 83 S.Ct. 1381, 10 L.Ed.2d 462 (1963). In Miller, for example, the Court held that a bank depositor has no “legitimate ‘expectation of privacy’ ” in financial information “voluntarily conveyed to . . . banks and exposed to their employees in the ordinary course of business.” 425 U.S., at 442, 96 S.Ct., at 1624. The Court explained:

“The depositor takes the risk, in revealing his affairs to another, that the information will be conveyed by that person to the Government. . . . This Court has held repeatedly that the Fourth Amendment does not prohibit the obtaining of information revealed to a third party and conveyed by him to Government authorities, even if the information is revealed on the assumption that it will be used only for a limited purpose and the confidence placed in the third party will not be betrayed.” Id., at 443, 96 S.Ct., at 1624.

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Because the depositor “assumed the risk” of disclosure, the Court held that it would be unreasonable for him to expect his financial records to remain private.

This analysis dictates that petitioner can claim no legitimate expectation of privacy here. When he used his phone, petitioner voluntarily conveyed numerical information to the telephone company and “exposed” that information to its equipment in the ordinary course of business. In so doing, petitioner assumed the risk that the company would reveal to police the numbers he dialed. The switching equipment that processed those numbers is merely the modern counterpart of the operator who, in an earlier day, personally completed calls for the subscriber. Petitioner concedes that if he had placed his calls through an operator, he could claim no legitimate expectation of privacy. Tr. of Oral Arg. 3–5, 11–12, 32. We are not inclined to hold that a different constitutional result is required because the telephone company has decided to automate.

Petitioner argues, however, that automatic switching equipment differs from a live operator in one pertinent respect. An operator, in theory at least, is capable of remembering every number that is conveyed to him by callers. Electronic equipment, by contrast can “remember” only those numbers it is programmed to record, and telephone companies, in view of their present billing practices, usually do not record local calls. Since petitioner, in calling McDonough, was making a local call, his expectation of privacy as to her number, on this theory, would be “legitimate.”

This argument does not withstand scrutiny. The fortuity of whether or not the phone company in fact elects to make a quasi-permanent record of a particular number dialed does not in our view, make any constitutional difference. Regardless of the phone company's election, petitioner voluntarily conveyed to it information that it had facilities for recording and that it was free to record. In these circumstances, petitioner assumed the risk that the information would be divulged to police. Under petitioner's theory, Fourth Amendment protection would exist, or not, depending on how the telephone company chose to define local-dialing zones, and depending on how it chose to bill its customers for local calls. Calls placed across town, or dialed directly, would be protected; calls placed across the river, or dialed with operator assistance, might not be. We are not inclined to make a crazy quilt of the Fourth Amendment, especially in circumstances where (as here) the pattern of protection would be dictated by billing practices of a private corporation.

We therefore conclude that petitioner in all probability entertained no actual expectation of privacy in the phone numbers he dialed, and that, even if he did, his expectation was not “legitimate.” The installation and use of a pen register,*746 consequently, was not a “search,” and no warrant was required. The judgment of the Maryland Court of Appeals is affirmed.

It is so ordered.

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Mr. Justice POWELL took no part in the consideration or decision of this case.

Mr. Justice STEWART, with whom Mr. Justice BRENNAN joins, dissenting. I am not persuaded that the numbers dialed from a private telephone fall

outside the constitutional protection of the Fourth and Fourteenth Amendments.

In Katz v. United States, 389 U.S. 347, 352, 88 S.Ct. 507, 512, 19 L.Ed.2d 576, the Court acknowledged the “vital role that the public telephone has come to play in private communication[s].” The role played by a private telephone is even more vital, and since Katz it has been abundantly clear that telephone conversations carried on by people in their homes or offices are fully protected by the Fourth and Fourteenth Amendments. As the Court said in United States v. United States District Court, 407 U.S. 297, 313, 92 S.Ct. 2125, 2135, 32 L.Ed.2d 752, “the broad and unsuspected governmental incursions into conversational privacy which electronic surveillance entails necessitate the application of Fourth Amendment safeguards.” (Footnote omitted.)

Nevertheless, the Court today says that those safeguards do not extend to the numbers dialed from a private telephone, apparently because when a caller dials a number the digits may be recorded by the telephone company for billing purposes. But that observation no more than describes the basic nature of telephone calls. A telephone call simply cannot be made without the use of telephone company property and without payment to the company for the service. The telephone conversation itself must be electronically transmitted by telephone company equipment, and may be recorded or overheard by the use of other company equipment. Yet we have squarely held that the user of even a public telephone is entitled “to assume that the words he utters into the mouthpiece will not be broadcast to the world.” Katz v. United States, supra, 389 U.S., at 352, 88 S.Ct., at 512.

The central question in this case is whether a person who makes telephone calls from his home is entitled to make a similar assumption about the numbers he dials. What the telephone company does or might do with those numbers is no more relevant to this inquiry than it would be in a case involving the conversation itself. It is simply not enough to say, after Katz, that there is no legitimate expectation of privacy in the numbers dialed because the caller assumes the risk that the telephone company will disclose them to the police.

I think that the numbers dialed from a private telephone—like the conversations that occur during a call—are within the constitutional protection recognized in Katz. It seems clear to me that information obtained by pen register surveillance of a private telephone is information in which the telephone subscriber has a legitimate expectation of privacy. The information captured by such surveillance emanates from private conduct within a person's home or office—locations that without question are entitled to Fourth and Fourteenth Amendment protection. Further, that information is an integral part of the telephonic communication that under Katz is entitled

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to constitutional protection, whether or not it is captured by a trespass into such an area.

The numbers dialed from a private telephone—although certainly more prosaic than the conversation itself—are not without “content.” Most private telephone subscribers may have their own numbers listed in a publicly distributed directory, but I doubt there are any who would be happy to have broadcast to the world a list of the local or long distance numbers they have called. This is not because such a list might in some sense be incriminating, but because it easily could reveal the identities of the persons and the places called, and thus reveal the most intimate details of a person's life.

I respectfully dissent.

Mr. Justice MARSHALL, with whom Mr. Justice BRENNAN joins, dissenting. The Court concludes that because individuals have no actual or

legitimate expectation of privacy in information they voluntarily relinquish to telephone companies, the use of pen registers by government agents is immune from Fourth Amendment scrutiny. Since I remain convinced that constitutional protections are not abrogated whenever a person apprises another of facts valuable in criminal investigations, see, e. g., United States v. White, 401 U.S. 745, 786–790, 91 S.Ct. 1122, 1143–1145, 28 L.Ed.2d 453 (1971) (Harlan, J., dissenting); id., at 795–796, 91 S.Ct., at 1147–1148 (MARSHALL, J., dissenting); California Bankers Assn. v. Shultz, 416 U.S. 21, 95–96, 94 S.Ct. 1494, 1534, 39 L.Ed.2d 812 (1974) (MARSHALL, J., dissenting); United States v. Miller, 425 U.S. 435, 455–456, 96 S.Ct. 1619, 1629–1630, 48 L.Ed.2d 71 (1976) (MARSHALL, J., dissenting), I respectfully dissent.

Applying the standards set forth in Katz v. United States, 389 U.S. 347, 361, 88 S.Ct. 507, 516, 19 L.Ed.2d 576 (1967) (Harlan, J., concurring), the Court first determines that telephone subscribers have no subjective expectations of privacy concerning the numbers they dial. To reach this conclusion, the Court posits that individuals somehow infer from the long-distance listings on their phone bills, and from the cryptic assurances of “help” in tracing obscene calls included in “most” phone books, that pen registers are regularly used for recording local calls. See ante, at 2581–2582. But even assuming, as I do not, that individuals “typically know” that a phone company monitors calls for internal reasons, ante, at 2581,1 it does not follow that they expect this information to be made available to the public in general or the government in particular. Privacy is not a discrete

11 Lacking the Court's apparently exhaustive knowledge of this Nation's telephone books and the reading habits of telephone subscribers, see ante, at 2581–2582, I decline to assume general public awareness of how obscene phone calls are traced. Nor am I persuaded that the scope of Fourth Amendment protection should turn on the concededly “esoteric functions” of pen registers in corporate billing, ante, at 2581, functions with which subscribers are unlikely to have intimate familiarity.

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commodity, possessed absolutely or not at all. Those who disclose certain facts to a bank or phone company for a limited business purpose need not assume that this information will be released to other persons for other purposes. See California Bankers Assn. v. Shultz, supra, 416 U.S., at 95–96, 94 S.Ct., at 1534 (MARSHALL, J., dissenting).

The crux of the Court's holding, however, is that whatever expectation of privacy petitioner may in fact have entertained regarding his calls, it is not one “society is prepared to recognize as ‘reasonable’.” Ante, at 2582. In so ruling, the Court determines that individuals who convey information to third parties have “assumed the risk” of disclosure to the government. Ante, at 2582, 2583. This analysis is misconceived in two critical respects.

Implicit in the concept of assumption of risk is some notion of choice. At least in the third-party consensual surveillance cases, which first incorporated risk analysis into Fourth Amendment doctrine, the defendant presumably had exercised some discretion in deciding who should enjoy his confidential communications. See, e. g., Lopez v. United States, 373 U.S. 427, 439, 83 S.Ct. 1381, 1388, 10 L.Ed.2d 462 (1963); Hoffa v. United States, 385 U.S. 293, 302–303, 87 S.Ct. 408, 413–414, 17 L.Ed.2d 374 (1966); United States v. White, supra, 401 U.S., at 751–752, 91 S.Ct., at 1125–1126 (plurality opinion). By contrast here, unless a person is prepared to forgo use of what for many has become a personal or professional necessity, he cannot help but accept the risk of surveillance. Cf. Lopez v. United States, supra, 373 U.S., at 465–466, 83 S.Ct., at 1401–1402 (BRENNAN, J., dissenting). It is idle to speak of “assuming” risks in contexts where, as a practical matter, individuals have no realistic alternative.

More fundamentally, to make risk analysis dispositive in assessing the reasonableness of privacy expectations would allow the government to define the scope of Fourth Amendment protections. For example, law enforcement officials, simply by announcing their intent to monitor the content of random samples of first-class mail or private phone conversations, could put the public on notice of the risks they would thereafter assume in such communications. See Amsterdam, Perspectives on the Fourth Amendment, 58 Minn.L.Rev. 349, 384, 407 (1974). Yet, although acknowledging this implication of its analysis, the Court is willing to concede only that, in some circumstances, a further “normative inquiry would be proper.” Ante, at 2580 n. 5. No meaningful effort is made to explain what those circumstances might be, or why this case is not among them.

In my view, whether privacy expectations are legitimate within the meaning of Katz depends not on the risks an individual can be presumed to accept when imparting information to third parties, but on the risks he should be forced to assume in a free and open society. By its terms, the constitutional prohibition of unreasonable searches and seizures assigns to the judiciary some prescriptive responsibility. As Mr. Justice Harlan, who formulated the standard the Court applies today, himself recognized: “[s]ince it is the task of the law to form and project, as well as mirror and reflect, we should not . . . merely recite . . . risks without examining the desirability of

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saddling them upon society.” United States v. White, supra, 401 U.S., at 786, 91 S.Ct., at 1143 (dissenting opinion). In making this *751 assessment, courts must evaluate the “intrinsic character” of investigative practices with reference to the basic values underlying the Fourth Amendment. California Bankers Assn. v. Shultz, 416 U.S., at 95, 94 S.Ct., at 1534 (MARSHALL, J., dissenting). And for those “extensive intrusions that significantly jeopardize [individuals'] sense of security . . . . more than self-restraint by law enforcement officials is required.” United States v. White, supra, 401 U.S., at 786, 91 S.Ct., at 1143 (Harlan, J., dissenting).

The use of pen registers, I believe, constitutes such an extensive intrusion. To hold otherwise ignores the vital role telephonic communication plays in our personal and professional relationships, see Katz v. United States, 389 U.S., at 352, 88 S.Ct., at 511, as well as the First and Fourth Amendment interests implicated by unfettered official surveillance. Privacy in placing calls is of value not only to those engaged in criminal activity. The prospect of unregulated governmental monitoring will undoubtedly prove disturbing even to those with nothing illicit to hide. Many individuals, including members of unpopular political organizations or journalists with confidential sources, may legitimately wish to avoid disclosure of their personal contacts. See NAACP v. Alabama, 357 U.S. 449, 463, 78 S.Ct. 1163, 1172, 2 L.Ed.2d 1488 (1958); Branzburg v. Hayes, 408 U.S. 665, 695, 92 S.Ct. 2646, 2663, 33 L.Ed.2d 626 (1972); id., at 728–734, 92 S.Ct., at 2673–2676 (STEWART, J., dissenting). Permitting governmental access to telephone records on less than probable cause may thus impede certain forms of political affiliation and journalistic endeavor that are the hallmark of a truly free society. Particularly given the Government's previous reliance on warrantless telephonic surveillance to trace reporters' sources and monitor protected political activity, I am unwilling to insulate use of pen registers from independent judicial review.

Just as one who enters a public telephone booth is “entitled to assume that the words he utters into the mouthpiece will not be broadcast to the world,” Katz v. United States, supra, 389 U.S., at 352, 88 S.Ct., at 512, so too, he should be entitled to assume that the numbers he dials in the privacy of his home will be recorded, if at all, solely for the phone company's business purposes. Accordingly, I would require law enforcement officials to obtain a warrant before they enlist telephone companies to secure information otherwise beyond the government's reach.

Feist Publications, Inc. v. Rural Telephone Service Company, Inc.

499 U.S. 340 (1991)

Justice O'Connor delivered the opinion of the Court.

This case requires us to clarify the extent of copyright protection available to telephone directory white pages.

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I

Rural Telephone Service Company, Inc., is a certified public utility that provides telephone service to several communities in northwest Kansas. It is subject to a state regulation that requires all telephone companies operating in Kansas to issue annually an updated telephone directory. Accordingly, as a condition of its monopoly franchise, Rural publishes a typical telephone directory, consisting of white pages and yellow pages. The white pages list in alphabetical order the names of Rural's subscribers, together with their towns and telephone numbers. The yellow pages list Rural's business subscribers alphabetically by category and feature classified advertisements of various sizes. Rural distributes its directory free of charge to its subscribers, but earns revenue by selling yellow pages advertisements.

Feist Publications, Inc., is a publishing company that specializes in area- wide telephone directories. Unlike a typical directory, which covers only a particular calling area, Feist's area-wide directories cover a much larger geographical range, reducing the need to call directory assistance or consult multiple directories. The Feist directory that is the subject of this litigation covers 11 different telephone service areas in 15 counties and contains 46,878 white pages listings--compared to Rural's approximately 7,700 listings. Like Rural's directory, Feist's is distributed free of charge and includes both white pages and yellow pages. Feist and Rural compete vigorously for yellow pages advertising.

As the sole provider of telephone service in its service area, Rural obtains subscriber information quite easily. Persons desiring telephone service must apply to Rural and provide their names and addresses; Rural then assigns them a telephone number. Feist is not a telephone company, let alone one with monopoly status, and therefore lacks independent access to any subscriber information. To obtain white pages listings for its area-wide directory, Feist approached each of the 11 telephone companies operating in northwest Kansas and offered to pay for the right to use its white pages listings.

Of the 11 telephone companies, only Rural refused to license its listings to Feist. Rural's refusal created a problem for Feist, as omitting these listings would have left a gaping hole in its area-wide directory, rendering it less attractive to potential yellow pages advertisers. In a decision subsequent to that which we review here, the District Court determined that this was precisely the reason Rural refused to license its listings. The refusal was motivated by an unlawful purpose "to extend its monopoly in telephone service to a monopoly in yellow pages advertising." Rural Telephone Service Co. v. Feist Publications, Inc., 737 F.Supp. 610, 622 (Kan.1990).

Unable to license Rural's white pages listings, Feist used them without Rural's consent. Feist began by removing several thousand listings that fell outside the geographic range of its area-wide directory, then hired personnel to investigate the 4,935 that remained. These employees verified the data reported by Rural and sought to obtain additional information. As a result, a typical Feist listing includes the individual's street address; most of Rural's listings do not. Notwithstanding

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these additions, however, 1,309 of the 46,878 listings in Feist's 1983 directory were identical to listings in Rural's 1982-1983 white pages . . . Four of these were fictitious listings that Rural had inserted into its directory to detect copying.

Rural sued for copyright infringement in the District Court for the District of Kansas taking the position that Feist, in compiling its own directory, could not use the information contained in Rural's white pages. Rural asserted that Feist's employees were obliged to travel door-to-door or conduct a telephone survey to discover the same information for themselves. Feist responded that such efforts were economically impractical and, in any event, unnecessary because the information copied was beyond the scope of copyright protection. The District Court granted summary judgment to Rural, explaining that "[c]ourts have consistently held that telephone directories are copyrightable" and citing a string of lower court decisions. 663 F.Supp. 214, 218 (1987) . . . We granted certiorari . . . to determine whether the copyright in Rural's directory protects the names, towns, and telephone numbers copied by Feist.

II

A

This case concerns the interaction of two well-established propositions. The first is that facts are not copyrightable; the other, that compilations of facts generally are. Each of these propositions possesses an impeccable pedigree. That there can be no valid copyright in facts is universally understood. The most fundamental axiom of copyright law is that "[n]o author may copyright his ideas or the facts he narrates." Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 556 (1985). Rural wisely concedes this point, noting in its brief that "[f]acts and discoveries, of course, are not themselves subject to copyright protection." At the same time, however, it is beyond dispute that compilations of facts are within the subject matter of copyright. Compilations were expressly mentioned in the Copyright Act of 1909, and again in the Copyright Act of 1976.

There is an undeniable tension between these two propositions. Many compilations consist of nothing but raw data--i.e., wholly factual information not accompanied by any original written expression. On what basis may one claim a copyright in such a work? Common sense tells us that 100 uncopyrightable facts do not magically change their status when gathered together in one place. Yet copyright law seems to contemplate that compilations that consist exclusively of facts are potentially within its scope.

The key to resolving the tension lies in understanding why facts are not copyrightable. The sine qua non of copyright is originality. To qualify for copyright protection, a work must be original to the author . . . Original, as the term is used in copyright, means only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity. 1 M. Nimmer & D. Nimmer, Copyright § § 2.01[A], [B] (1990) (hereinafter Nimmer). To be sure, the requisite level of creativity is extremely low; even a slight amount will suffice. The vast majority of works make the grade quite easily, as they possess some creative spark, "no matter how crude, humble or

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obvious" it might be. Id., § 1.08[C][1]. Originality does not signify novelty; a work may be original even though it closely resembles other works so long as the similarity is fortuitous, not the result of copying. To illustrate, assume that two poets, each ignorant of the other, compose identical poems. Neither work is novel, yet both are original and, hence, copyrightable . . .

Originality is a constitutional requirement. The source of Congress' power to enact copyright laws is Article I, § 8, cl. 8, of the Constitution, which authorizes Congress to "secur[e] for limited Times to Authors ... the exclusive Right to their respective Writings."

. . .

It is this bedrock principle of copyright that mandates the law's seemingly disparate treatment of facts and factual compilations. "No one may claim originality as to facts." Id., § 2.11[A], p. 2-157. This is because facts do not owe their origin to an act of authorship. The distinction is one between creation and discovery: The first person to find and report a particular fact has not created the fact; he or she has merely discovered its existence. . . "The discoverer merely finds and records." Nimmer § 2.03[E] . . .

Factual compilations, on the other hand, may possess the requisite originality. The compilation author typically chooses which facts to include, in what order to place them, and how to arrange the collected data so that they may be used effectively by readers. These choices as to selection and arrangement, so long as they are made independently by the compiler and entail a minimal degree of creativity, are sufficiently original that Congress may protect such compilations through the copyright laws. Nimmer § § 2.11[D], 3.03; Denicola 523, n. 38. Thus, even a directory that contains absolutely no protectable written expression, only facts, meets the constitutional minimum for copyright protection if it features an original selection or arrangement. . .

This protection is subject to an important limitation. The mere fact that a work is copyrighted does not mean that every element of the work may be protected. Originality remains the sine qua non of copyright; accordingly, copyright protection may extend only to those components of a work that are original to the author. Ginsburg, Creation and Commercial Value: Copyright Protection of Works of Information, 90 Colum.L.Rev. 1865, 1868, and n. 12 (1990) (hereinafter Ginsburg). Thus, if the compilation author clothes facts with an original collocation of words, he or she may be able to claim a copyright in this written expression. Others may copy the underlying facts from the publication, but not the precise words used to present them. In Harper & Row, for example, we explained that President Ford could not prevent others from copying bare historical facts from his autobiography, see 471 U.S., at 556-557, but that he could prevent others from copying his "subjective descriptions and portraits of public figures." Id., at 563. Where the compilation author adds no written expression but rather lets the facts speak for themselves, the expressive element is more elusive. The only conceivable expression is the manner in which the compiler has selected and arranged the facts. Thus, if the selection and arrangement are original, these elements of the work are eligible for copyright protection . . . No matter how original

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the format, however, the facts themselves do not become original through association . . .

This inevitably means that the copyright in a factual compilation is thin. Notwithstanding a valid copyright, a subsequent compiler remains free to use the facts contained in another's publication to aid in preparing a competing work, so long as the competing work does not feature the same selection and arrangement. As one commentator explains it: "[N]o matter how much original authorship the work displays, the facts and ideas it exposes are free for the taking.... [T]he very same facts and ideas may be divorced from the context imposed by the author, and restated or reshuffled by second comers, even if the author was the first to discover the facts or to propose the ideas." Ginsburg 1868.

It may seem unfair that much of the fruit of the compiler's labor may be used by others without compensation. As Justice Brennan has correctly observed, however, this is not "some unforeseen byproduct of a statutory scheme." Harper & Row, 471 U.S., at 589, 105 S.Ct., at 2245 (dissenting opinion). It is, rather, "the essence of copyright," ibid., and a constitutional requirement. The primary objective of copyright is not to reward the labor of authors, but "[t]o promote the Progress of Science and useful Arts." Art. I, § 8, cl. 8 . . . To this end, copyright assures authors the right to their original expression, but encourages others to build freely upon the ideas and information conveyed by a work . . . This principle, known as the idea/expression or fact/expression dichotomy, applies to all works of authorship. As applied to a factual compilation, assuming the absence of original written expression, only the compiler's selection and arrangement may be protected; the raw facts may be copied at will. This result is neither unfair nor unfortunate. It is the means by which copyright advances the progress of science and art.

. . .

This, then, resolves the doctrinal tension: Copyright treats facts and factual compilations in a wholly consistent manner. Facts, whether alone or as part of a compilation, are not original and therefore may not be copyrighted. A factual compilation is eligible for copyright if it features an original selection or arrangement of facts, but the copyright is limited to the particular selection or arrangement. In no event may copyright extend to the facts themselves.

B

As we have explained, originality is a constitutionally mandated prerequisite for copyright protection. The Court's decisions announcing this rule predate the Copyright Act of 1909, but ambiguous language in the 1909 Act caused some lower courts temporarily to lose sight of this requirement.

. . .

. . . these courts developed a new theory to justify the protection of factual compilations. Known alternatively as "sweat of the brow" or "industrious collection," the underlying notion was that copyright was a reward for the hard work

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that went into compiling facts. The classic formulation of the doctrine appeared in Jeweler's Circular Publishing Co., 281 F., at 88:

The right to copyright a book upon which one has expended labor in its preparation does not depend upon whether the materials which he has collected consist or not of matters which are publici juris, or whether such materials show literary skill or originality, either in thought or in language, or anything more than industrious collection. The man who goes through the streets of a town and puts down the names of each of the inhabitants, with their occupations and their street number, acquires material of which he is the author" (emphasis added).

The "sweat of the brow" doctrine had numerous flaws, the most glaring being that it extended copyright protection in a compilation beyond selection and arrangement--the compiler's original contributions--to the facts themselves. Under the doctrine, the only defense to infringement was independent creation. A subsequent compiler was "not entitled to take one word of information previously published," but rather had to "independently wor[k] out the matter for himself, so as to arrive at the same result from the same common sources of information." Id., at 88-89 (internal quotation marks omitted). "Sweat of the brow" courts thereby eschewed the most fundamental axiom of copyright law-- that no one may copyright facts or ideas . . .

C

"Sweat of the brow" decisions did not escape the attention of the Copyright Office. When Congress decided to overhaul the copyright statute . . ., the Copyright Office promptly recommended that Congress clear up the confusion in the lower courts as to the basic standards of copyrightability. The Register of Copyrights . . . suggested making the originality requirement explicit.

Congress took the Register's advice. In enacting the Copyright Act of 1976, Congress dropped the reference to "all the writings of an author" and replaced it with the phrase "original works of authorship." 17 U.S.C. § 102(a) . . .

. . . Congress enacted two new provisions. First, to make clear that compilations were not copyrightable per se, Congress provided a definition of the term "compilation." Second, to make clear that the copyright in a compilation did not extend to the facts themselves, Congress enacted § 103.

The definition of "compilation" is found in § 101 of the 1976 Act. It defines a "compilation" in the copyright sense as "a work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship" (emphasis added).

The purpose of the statutory definition is to emphasize that collections of facts are not copyrightable per se. It conveys this message through its tripartite structure, as emphasized above by the italics. The statute identifies three distinct

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elements and requires each to be met for a work to qualify as a copyrightable compilation: (1) the collection and assembly of pre-existing material, facts, or data; (2) the selection, coordination, or arrangement of those materials; and (3) the creation, by virtue of the particular selection, coordination, or arrangement, of an "original" work of authorship . . .

. . .

The key to the statutory definition is the second requirement. It instructs courts that, in determining whether a fact-based work is an original work of authorship, they should focus on the manner in which the collected facts have been selected, coordinated, and arranged. This is a straightforward application of the originality requirement. Facts are never original, so the compilation author can claim originality, if at all, only in the way the facts are presented. To that end, the statute dictates that the principal focus should be on whether the selection, coordination, and arrangement are sufficiently original to merit protection.

Not every selection, coordination, or arrangement will pass muster. This is plain from the statute. It states that, to merit protection, the facts must be selected, coordinated, or arranged "in such a way" as to render the work as a whole original. This implies that some "ways" will trigger copyright, but that others will not . . . we conclude that the statute envisions that there will be some fact-based works in which the selection, coordination, and arrangement are not sufficiently original to trigger copyright protection.

As discussed earlier, however, the originality requirement is not particularly stringent. A compiler may settle upon a selection or arrangement that others have used; novelty is not required. Originality requires only that the author make the selection or arrangement independently (i.e., without copying that selection or arrangement from another work), and that it display some minimal level of creativity. Presumably, the vast majority of compilations will pass this test, but not all will. There remains a narrow category of works in which the creative spark is utterly lacking or so trivial as to be virtually nonexistent . . .

Even if a work qualifies as a copyrightable compilation, it receives only limited protection. This is the point of § 103 of the Act. Section 103 explains that "[t]he subject matter of copyright ... includes compilations," § 103(a), but that copyright protects only the author's original contributions--not the facts or information conveyed:

The copyright in a compilation ... extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material." §103(b).

As § 103 makes clear, copyright is not a tool by which a compilation author may keep others from using the facts or data he or she has collected . . . Rather, the facts contained in existing works may be freely copied because copyright protects only the elements that owe their origin to the compiler--the selection, coordination, and arrangement of facts.

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. . .

III

There is no doubt that Feist took from the white pages of Rural's directory a substantial amount of factual information. At a minimum, Feist copied the names, towns, and telephone numbers of 1,309 of Rural's subscribers. Not all copying, however, is copyright infringement. To establish infringement, two elements must be proven: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original . . . The first element is not at issue here; Feist appears to concede that Rural's directory, considered as a whole, is subject to a valid copyright because it contains some foreword text, as well as original material in its yellow pages advertisements.

The question is whether Rural has proved the second element. In other words, did Feist, by taking 1,309 names, towns, and telephone numbers from Rural's white pages, copy anything that was "original" to Rural? Certainly, the raw data does not satisfy the originality requirement. Rural may have been the first to discover and report the names, towns, and telephone numbers of its subscribers, but . . . these bits of information are uncopyrightable facts; they existed before Rural reported them and would have continued to exist if Rural had never published a telephone directory . . .

Rural essentially concedes the point by referring to the names, towns, and telephone numbers as "preexisting material." . . . Section 103(b) states explicitly that the copyright in a compilation does not extend to "the preexisting material employed in the work."

The question that remains is whether Rural selected, coordinated, or arranged these uncopyrightable facts in an original way. As mentioned, originality is not a stringent standard; it does not require that facts be presented in an innovative or surprising way. It is equally true, however, that the selection and arrangement of facts cannot be so mechanical or routine as to require no creativity whatsoever . . .

The selection, coordination, and arrangement of Rural's white pages do not satisfy the minimum constitutional standards for copyright protection. As mentioned at the outset, Rural's white pages are entirely typical. Persons desiring telephone service in Rural's service area fill out an application and Rural issues them a telephone number. In preparing its white pages, Rural simply takes the data provided by its subscribers and lists it alphabetically by surname. The end product is a garden-variety white pages directory, devoid of even the slightest trace of creativity.

Rural's selection of listings could not be more obvious: It publishes the most basic information--name, town, and telephone number--about each person who applies to it for telephone service. This is "selection" of a sort, but it lacks the modicum of creativity necessary to transform mere selection into copyrightable

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expression. Rural expended sufficient effort to make the white pages directory useful, but insufficient creativity to make it original.

. . .

Nor can Rural claim originality in its coordination and arrangement of facts. The white pages do nothing more than list Rural's subscribers in alphabetical order. This arrangement may, technically speaking, owe its origin to Rural; no one disputes that Rural undertook the task of alphabetizing the names itself. But there is nothing remotely creative about arranging names alphabetically in a white pages directory. It is an age-old practice, firmly rooted in tradition and so commonplace that it has come to be expected as a matter of course . . . It is not only unoriginal, it is practically inevitable. This time-honored tradition does not possess the minimal creative spark required by the Copyright Act and the Constitution.

We conclude that the names, towns, and telephone numbers copied by Feist were not original to Rural and therefore were not protected by the copyright in Rural's combined white and yellow pages directory. As a constitutional matter, copyright protects only those constituent elements of a work that possess more than a de minimis quantum of creativity. Rural's white pages, limited to basic subscriber information and arranged alphabetically, fall short of the mark . . . Given that some works must fail, we cannot imagine a more likely candidate. Indeed, were we to hold that Rural's white pages pass muster, it is hard to believe that any collection of facts could fail.

Because Rural's white pages lack the requisite originality, Feist's use of the listings cannot constitute infringement. This decision should not be construed as demeaning Rural's efforts in compiling its directory, but rather as making clear that copyright rewards originality, not effort . . .

The judgment of the Court of Appeals is

Reversed.

Princeton University Press v. Michigan Document Services, Inc.

99 F.3d 1381 (6th Cir. 1996)

David A. Nelson, Circuit Judge.

This is a copyright infringement case. The corporate defendant, Michigan Document Services, Inc., is a commercial copyshop that reproduced substantial segments of copyrighted works of scholarship, bound the copies into “coursepacks,” and sold the coursepacks to students for use in fulfilling reading assignments given by professors at the University of Michigan. The copyshop acted without permission from the copyright holders, and the main question presented is whether the “fair use” doctrine codified at 17 U.S.C. § 107 obviated the need to obtain such permission.

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Answering this question “no,” and finding the infringement willful, the district court entered a summary judgment order in which the copyright holders were granted equitable relief and were awarded damages that may have been enhanced for willfulness. Princeton Univ. Press v. Michigan Document Servs., Inc., 855 F.Supp. 905 (E.D.Mich.1994). A three-judge panel of this court reversed the judgment on appeal, but a majority of the active judges of the court subsequently voted to rehear the case en banc. The appeal has now been argued before the full court.

We agree with the district court that the defendants' commercial exploitation of the copyrighted materials did not constitute fair use, and we shall affirm that branch of the district court's judgment. We believe that the district court erred in its finding of willfulness, however, and we shall vacate the damages award because of its possible linkage to that finding.

Thanks to relatively recent advances in technology, the coursepack-an artifact largely unknown to college students when the author of this opinion was an undergraduate-has become almost as ubiquitous at American colleges and universities as the conventional textbook. From the standpoint of the professor responsible for developing and teaching a particular course, the availability of coursepacks has an obvious advantage; by selecting readings from a variety of sources, the professor can create what amounts to an anthology perfectly tailored to the course the professor wants to present.

The physical production of coursepacks is typically handled by a commercial copyshop. The professor gives the copyshop the materials of which the coursepack is to be made up, and the copyshop does the rest. Adding a cover page and a table of contents, perhaps, the copyshop runs off as many sets as are needed, does the necessary binding, and sells the finished product to the professor's students.

Ann Arbor, the home of the University of Michigan, is also home to several copyshops. Among them is defendant Michigan Document Services (MDS), a corporation owned by defendant James Smith. We are told that MDS differs from most, if not all, of its competitors in at least one important way: it does not request permission from, nor does it pay agreed royalties to, copyright owners.

Mr. Smith has been something of a crusader against the system under which his competitors have been paying agreed royalties, or “permission fees” as they are known in the trade. The story begins in March of 1991, when Judge Constance Baker Motley, of the United States District Court for the Southern District of New York, decided the first reported case involving the copyright implications of educational coursepacks. See Basic Books, Inc. v. Kinko's Graphics Corp., 758 F.Supp. 1522 (S.D.N.Y.1991), holding that a Kinko's copyshop had violated the copyright statute by creating and selling coursepacks without permission from the publishing houses that held the copyrights. After Kinko's, we are told, many copyshops that had not previously requested permission from copyright holders began to obtain such permission. Mr. Smith chose not to do so. He consulted an attorney, and the attorney apparently advised him that while it was “risky” not to obtain permission, there were flaws in the Kinko's decision. Mr. Smith also undertook his own study of the fair use doctrine, reading what he could find on this subject in a law library. He ultimately concluded that the Kinko's case had been wrongly decided, and he

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publicized this conclusion through speeches, writings, and advertisements. His advertisements stressed that professors whose students purchased his coursepacks would not have to worry about delays attendant upon obtaining permission from publishers.

Not surprisingly, Mr. Smith attracted the attention of the publishing industry. Three publishers-Princeton University Press, MacMillan, Inc., and St. Martin's Press, Inc.-eventually brought the present suit against Mr. Smith and his corporation.

Each of the plaintiff publishers maintains a department that processes requests for permission to reproduce portions of copyrighted works. (In addition, copyshops may request such permission through the Copyright Clearance Center, a national clearinghouse.) Macmillan and St. Martin's, both of which are for-profit companies, claim that they generally respond within two weeks to requests for permission to make copies for classroom use. Princeton, a non-profit organization, claims to respond within two to four weeks. Mr. Smith has not put these claims to the test, and he has not paid permission fees.

The plaintiffs allege infringement of the copyrights on six different works that were excerpted without permission. The works in question, and the statistics on the magnitude of the excerpts, are as follows: Nancy J. Weiss, Farewell to the Party of Lincoln: Black Politics in the Age of FDR (95 pages copied, representing 30 percent of the entire book); Walter Lippmann, Public Opinion (45 pages copied, representing 18 percent of the whole); Robert E. Layne, Political Ideology: Why the American Common Man Believes What He Does (78 pages, 16 percent); Roger Brown, Social Psychology (52 pages, 8 percent); Milton Rokeach, The Nature of Human Values (77 pages, 18 percent); James S. Olson and Randy Roberts, Where the Domino Fell, America and Vietnam, 1945-1950 (17 pages, 5 percent). The extent of the copying is undisputed, and the questions presented by the case appear to be purely legal in nature.

II

The fair use doctrine, which creates an exception to the copyright monopoly, “permits [and requires] courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.” Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577, 114 S.Ct. 1164, 1170, 127 L.Ed.2d 500 (1994), quoting Stewart v. Abend, 495 U.S. 207, 236, 110 S.Ct. 1750, 1768, 109 L.Ed.2d 184 (1990). Initially developed by the courts, the doctrine was codified at 17 U.S.C. § 107 in 1976. Congress used the following formulation in Section 107:

“[T]he fair use of a copyrighted work, including such use by reproduction in copies ... for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include-

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

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(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work....”

This language does not provide blanket immunity for “multiple copies for classroom use.” Rather, “whether a use referred to in the first sentence of Section 107 is a fair use in a particular case ... depend[s] upon the application of the determinative factors.” Campbell, 510 U.S. at 578 n. 9, 114 S.Ct. at 1170 n. 9, quoting S.Rep. No. 94-473, p. 62.

The four statutory factors may not have been created equal. In determining whether a use is “fair,” the Supreme Court has said that the most important factor is the fourth, the one contained in 17 U.S.C. § 107(4). See Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566, 105 S.Ct. 2218, 2233, 85 L.Ed.2d 588 (1985), citing 3 M. Nimmer, Copyright § 13.05[A], at 13-76 (1984). (But see American Geophysical Union v. Texaco Inc., 60 F.3d 913, 926 (2d Cir.1994), cert. dismissed, 516 U.S. 1005, 116 S.Ct. 592, 133 L.Ed.2d 486 (1995), suggesting that the Supreme Court may now have abandoned the idea that the fourth factor is of paramount importance.) We take it that this factor, “the effect of the use upon the potential market for or value of the copyrighted work,” is at least primus inter pares, figuratively speaking, and we shall turn to it first.

The burden of proof as to market effect rests with the copyright holder if the challenged use is of a “noncommercial” nature. The alleged infringer has the burden, on the other hand, if the challenged use is “commercial” in nature. Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 451, 104 S.Ct. 774, 793, 78 L.Ed.2d 574 (1984). In the case at bar the defendants argue that the burden of proof rests with the publishers because the use being challenged is “noncommercial.” We disagree.

It is true that the use to which the materials are put by the students who purchase the coursepacks is noncommercial in nature. But the use of the materials by the students is not the use that the publishers are challenging. What the publishers are challenging is the duplication of copyrighted materials for sale by a for-profit corporation that has decided to maximize its profits-and give itself a competitive edge over other copyshops-by declining to pay the royalties requested by the holders of the copyrights.

The defendants' use of excerpts from the books at issue here was no less commercial in character than was The Nation magazine's use of copyrighted material in Harper & Row, where publication of a short article containing excerpts from the still unpublished manuscript of a book by President Ford was held to be an unfair use. Like the students who purchased unauthorized coursepacks, the purchasers of The Nation did not put the contents of the magazine to commercial use-but that did not stop the Supreme Court from characterizing the defendant's

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use of the excerpts as “a publication [that] was commercial as opposed to nonprofit....” Harper & Row, 471 U.S. at 562, 105 S.Ct. at 2231. And like the use that is being challenged in the case now before us, the use challenged in Harper & Row was “presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright.” Id., quoting Sony, 464 U.S. at 451, 104 S.Ct. at 793

The strength of the Sony presumption may vary according to the context in which it arises, and the presumption disappears entirely where the challenged use is one that transforms the original work into a new artistic creation. See Campbell, 510 U.S. at 587-89, 114 S.Ct. at 1176. Perhaps the presumption is weaker in the present case than it would be in other contexts. There is a presumption of unfairness here, nonetheless, and we are not persuaded that the defendants have rebutted it.

If we are wrong about the existence of the presumption-if the challenged use is not commercial, in other words, and if the plaintiff publishers have the burden of proving an adverse effect upon either the potential market for the copyrighted work or the potential value of the work-we believe that the publishers have carried the burden of proving a diminution in potential market value.

One test for determining market harm [is this:] “[T]o negate fair use,” the Supreme Court has said, “one need only show that if the challenged use ‘should become widespread, it would adversely affect the potential market for the copyrighted work.’ ” Harper & Row, 471 U.S. at 568, 105 S.Ct. at 2234, quoting Sony, 464 U.S. at 451, 104 S.Ct. at 793 (emphasis supplied in part). Under this test, we believe, it is reasonably clear that the plaintiff publishers have succeeded in negating fair use.

As noted above, most of the copyshops that compete with MDS in the sale of coursepacks pay permission fees for the privilege of duplicating and selling excerpts from copyrighted works. The three plaintiffs together have been collecting permission fees at a rate approaching $500,000 a year. If copyshops across the nation were to start doing what the defendants have been doing here, this revenue stream would shrivel and the potential value of the copyrighted works of scholarship published by the plaintiffs would be diminished accordingly.

The defendants contend that it is circular to assume that a copyright holder is entitled to permission fees and then to measure market loss by reference to the lost fees. They argue that market harm can only be measured by lost sales of books, not permission fees. But the circularity argument proves too much. Imagine that the defendants set up a printing press and made exact reproductions-asserting that such reproductions constituted “fair use”-of a book to which they did not hold the copyright. Under the defendants' logic it would be circular for the copyright holder to argue market harm because of lost copyright revenues, since this would assume that the copyright holder had a right to such revenues.

A “circularity” argument indistinguishable from that made by the defendants here was rejected by the Second Circuit in American Geophysical, 60 F.3d at 929-31 (Jon O. Newman, C.J.), where the photocopying of scientific articles for use by Texaco researchers was held to be an unfair use. It is true, the Second Circuit

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acknowledged, that “a copyright holder can always assert some degree of adverse [e]ffect on its potential licensing revenues as a consequence of [the defendant's use] ... simply because the copyright holder has not been paid a fee to permit that particular use.” Id. at 929 n. 17. But such an assertion will not carry much weight if the defendant has “filled a market niche that the [copyright owner] simply had no interest in occupying.” Id. at 930 (quoting Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1377 (2d Cir.1993)). Where, on the other hand, the copyright holder clearly does have an interest in exploiting a licensing market-and especially where the copyright holder has actually succeeded in doing so-“it is appropriate that potential licensing revenues for photocopying be considered in a fair use analysis.” American Geophysical, 60 F.3d at 930. Only “traditional, reasonable, or likely to be developed markets” are to be considered in this connection, and even the availability of an existing system for collecting licensing fees will not be conclusive. Id. at 930-31. But Congress has implicitly suggested that licensing fees should be recognized in appropriate cases as part of the potential market for or value of the copyrighted work, and it was primarily because of lost licensing revenue that the Second Circuit agreed with the finding of the district court in American Geophysical that “the publishers have demonstrated a substantial harm to the value of their copyrights through [Texaco's] copying.” Id. at 931 (quoting the district court opinion (Pierre N. Leval, J.) reported at 802 F.Supp. 1, 21 (S.D.N.Y.1992)).

The approach followed by Judges Newman and Leval in the American Geophysical litigation is fully consistent with the Supreme Court case law. In Harper & Row, where there is no indication in the opinion that the challenged use caused any diminution in sales of President Ford's memoirs, the Court found harm to the market for the licensing of excerpts. The Court's reasoning-which was obviously premised on the assumption that the copyright holder was entitled to licensing fees for use of its copyrighted materials-is no more circular than that employed here. And in Campbell, where the Court was unwilling to conclude that the plaintiff had lost licensing revenues under the fourth statutory factor, the Court reasoned that a market for critical parody was not one “that creators of original works would in general develop or license others to develop.” Campbell, 510 U.S. at 592, 114 S.Ct. at 1178.

The potential uses of the copyrighted works at issue in the case before us clearly include the selling of permission to reproduce portions of the works for inclusion in coursepacks-and the likelihood that publishers actually will license such reproduction is a demonstrated fact. A licensing market already exists here, as it did not in a case on which the plaintiffs rely, Williams & Wilkins Co. v. United States, 203 Ct.Cl. 74, 487 F.2d 1345 (1973), aff'd by an equally divided Court, 420 U.S. 376, 95 S.Ct. 1344, 43 L.Ed.2d 264 (1975). Thus there is no circularity in saying, as we do say, that the potential for destruction of this market by widespread circumvention of the plaintiffs' permission fee system is enough, under the Harper & Row test, “to negate fair use.”

Our final point with regard to the fourth statutory factor concerns the affidavits of the three professors who assigned one or more of the copyrighted works to be read by their students. The defendants make much of the proposition that these professors only assigned excerpts when they would not have required

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their students to purchase the entire work. But what seems significant to us is that none of these affidavits shows that the professor executing the affidavit would have refrained from assigning the copyrighted work if the position taken by the copyright holder had been sustained beforehand.

It is true that Professor Victor Lieberman, who assigned the excerpt from the Olson and Roberts book on America and Vietnam, raises questions about the workability of the permission systems of “many publishers.” In 1991, Professor Lieberman avers, a Kinko's copyshop to which he had given materials for inclusion in a coursepack experienced serious delays in obtaining permissions from unnamed publishers. Professor Lieberman does not say that timely permission could not have been obtained from the publisher of the Olson and Roberts book, however, and he does not say that he would have refrained from assigning the work if the copyshop had been required to pay a permission fee for it.

It is also true that the publisher of one of the copyrighted works in question here (Public Opinion, by Walter Lippmann) would have turned down a request for permission to copy the 45-page excerpt included in a coursepack prepared to the specifications of Professor Donald Kinder. The excerpt was so large that the publisher would have preferred that students buy the book itself, and the work was available in an inexpensive paperback edition. But Professor Kinder does not say that he would have refrained from assigning the excerpt from the Lippmann book if it could not have been included in the coursepack. Neither does he say that he would have refrained from assigning any of the other works mentioned in his affidavit had he known that the defendants would be required to pay permission fees for them.

The third professor, Michael Dawson, assigned a 95-page excerpt from the book on black politics by Nancy Weiss. Professor Dawson does not say that a license was not available from the publisher of the Weiss book, and he does not say that the license fee would have deterred him from assigning the book.

III

In the context of nontransformative uses, at least, and except insofar as they touch on the fourth factor, the other statutory factors seem considerably less important. We shall deal with them relatively briefly.

A

As to “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes,” 17 U.S.C. § 107(1), we have already explained our reasons for concluding that the challenged use is of a commercial nature.

The defendants argue that the copying at issue here would be considered “nonprofit educational” if done by the students or professors themselves. The defendants also note that they can profitably produce multiple copies for less than it would cost the professors or the students to make the same number of copies. Most of the copyshops with which the defendants compete have been paying

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permission fees, however, and we assume that these shops too can perform the copying on a more cost-effective basis than the professors or students can. This strikes us as a more significant datum than the ability of a black market copyshop to beat the do-it-yourself cost.

As to the proposition that it would be fair use for the students or professors to make their own copies, the issue is by no means free from doubt. We need not decide this question, however, for the fact is that the copying complained of here was performed on a profit-making basis by a commercial enterprise. And “[t]he courts have ... properly rejected attempts by for-profit users to stand in the shoes of their customers making nonprofit or noncommercial uses.” Patry, Fair Use in Copyright Law, at 420 n. 34. As the House Judiciary Committee stated in its report on the 1976 legislation,

“[I]t would not be possible for a non-profit institution, by means of contractual arrangements with a commercial copying enterprise, to authorize the enterprise to carry out copying and distribution functions that would be exempt if conducted by the non-profit institution itself.” H.R.Rep. No. 1476, 94th Cong., 2d Sess. at 74 (1976), U.S.Code Cong. & Admin.News 5659, 5687-88.

It should be noted, finally, that the degree to which the challenged use has transformed the original copyrighted works-another element in the first statutory factor-is virtually indiscernible. If you make verbatim copies of 95 pages of a 316-page book, you have not transformed the 95 pages very much-even if you juxtapose them to excerpts from other works and package everything conveniently. This kind of mechanical “transformation” bears little resemblance to the creative metamorphosis accomplished by the parodists in the Campbell case.

B

The second statutory factor, “the nature of the copyrighted work,” is not in dispute here. The defendants acknowledge that the excerpts copied for the coursepacks contained creative material, or “expression;” it was certainly not telephone book listings that the defendants were reproducing. This factor too cuts against a finding of fair use.

C

The third statutory factor requires us to assess “the amount and substantiality of the portion used in relation to the copyrighted work as a whole.” Generally speaking, at least, “the larger the volume (or the greater the importance) of what is taken, the greater the affront to the interests of the copyright owner, and the less likely that a taking will qualify as a fair use.” Pierre N. Leval, Toward a Fair Use Standard, 103 HARV. L. REV. 1105, 1122 (1990).

The amounts used in the case at bar-8,000 words in the shortest excerpt-far exceed the 1,000-word safe harbor that we shall discuss in the next part of this opinion. See H.R.Rep. No. 1476, 94th Cong., 2d Sess. (1976), reprinted after 17 U.S.C.A. § 107. The defendants were using as much as 30 percent of one copyrighted work, and in no case did they use less than 5 percent of the

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copyrighted work as a whole. These percentages are not insubstantial. And to the extent that the third factor requires some type of assessment of the “value” of the excerpted material in relation to the entire work, the fact that the professors thought the excerpts sufficiently important to make them required reading strikes us as fairly convincing “evidence of the qualitative value of the copied material.” Harper & Row, 471 U.S. at 565, 105 S.Ct. at 2233. We have no reason to suppose that in choosing the excerpts to be copied, the professors passed over material that was more representative of the major ideas of the work as a whole in preference to material that was less representative.

The third factor may have more significance for the 95-page excerpt from the black politics book than for the 17-page excerpt from the Vietnam book. In each instance, however, the defendants have failed to carry their burden of proof with respect to “amount and substantiality.”

IV

We turn now to the pertinent legislative history. The general revision of the copyright law enacted in 1976 was developed through a somewhat unusual process. Congress and the Register of Copyrights initiated and supervised negotiations among interested groups-groups that included authors, publishers, and educators-over specific legislative language. Most of the language that emerged was enacted into law or was made a part of the committee reports. See Jessica Litman, Copyright, Compromise, and Legislative History, 72 CORNELL L. R EV. 857 (1987). The statutory fair use provisions are a direct result of this process. Id. at 876-77. So too is the “Agreement on Guidelines for Classroom Copying in Not-for-Profit Educational Institutions With Respect to Books and Periodicals”-commonly called the “Classroom Guidelines”-set out in H.R.Rep. No. 1476 at 68-71, 94th Cong., 2d Sess. (1976). The House and Senate conferees explicitly accepted the Classroom Guidelines “as part of their understanding of fair use,” H.R. Conf. Rep. No. 1733, 94th Cong.2d Sess. at 70 (1976), and the Second Circuit has characterized the guidelines as “persuasive authority....” American Geophysical, 60 F.3d at 919 n. 5, citing Kinko's, 758 F.Supp. at 1522-36.

There are strong reasons to consider this legislative history. The statutory factors are not models of clarity, and the fair use issue has long been a particularly troublesome one. See Acuff-Rose Music, Inc. v. Campbell, 972 F.2d 1429, 1439 (6th Cir.1992) (Nelson, J., dissenting), rev'd, 510 U.S. 569, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994). Not surprisingly, courts have often turned to the legislative history when considering fair use questions. See Harper & Row, 471 U.S. at 549-53, 105 S.Ct. at 2225-27, where the Supreme Court looked not only to the House report cited above, but to an earlier Senate report “discussing fair use of photocopied materials in the classroom....” And see Campbell, 510 U.S. at 574-78, 114 S.Ct. at 1170, where the Court likewise sifted through the congressional committee reports.

Although the Classroom Guidelines purport to “state the minimum and not the maximum standards of educational fair use,” they do evoke a general idea, at least, of the type of educational copying Congress had in mind. The guidelines allow multiple copies for classroom use provided that (1) the copying meets the test of brevity (1,000 words, in the present context); (2) the copying meets the test of

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spontaneity, under which “[t]he inspiration and decision to use the work and the moment of its use for maximum teaching effectiveness [must be] so close in time that it would be unreasonable to expect a timely reply to a request for permission;” (3) no more than nine instances of multiple copying take place during a term, and only a limited number of copies are made from the works of any one author or from any one collective work; (4) each copy contains a notice of copyright; (5) the copying does not substitute for the purchase of “books, publishers' reprints or periodicals;” and (6) the student is not charged any more than the actual cost of copying. The Classroom Guidelines also make clear that unauthorized copying to create “anthologies, compilations or collective works” is prohibited. H.R.Rep. No. 1476 at 69.

In its systematic and premeditated character, its magnitude, its anthological content, and its commercial motivation, the copying done by MDS goes well beyond anything envisioned by the Congress that chose to incorporate the guidelines in the legislative history. Although the guidelines do not purport to be a complete and definitive statement of fair use law for educational copying, and although they do not have the force of law, they do provide us general guidance. The fact that the MDS copying is light years away from the safe harbor of the guidelines weighs against a finding of fair use.

Although the Congress that passed the Copyright Act in 1976 would pretty clearly have thought it unfair for a commercial copyshop to appropriate as much as 30 percent of a copyrighted work without paying the license fee demanded by the copyright holder, the changes in technology and teaching practices that have occurred over the last two decades might conceivably make Congress more sympathetic to the defendants' position today. If the law on this point is to be changed, however, we think the change should be made by Congress and not by the courts.

V

We take as our text for the concluding part of this discussion of fair use Justice Stewart's well-known exposition of the correct approach to “ambiguities” (see Sony, 464 U.S. at 431-32, 104 S.Ct. at 783-84) in the copyright law:

“The immediate effect of our copyright law is to secure a fair return for an ‘author's' creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good. ‘The sole interest of the United States and the primary object in conferring the monopoly,’ this Court has said, ‘lie in the general benefits derived by the public from the labors of authors.’ ... When technological change has rendered its literal terms ambiguous, the Copyright Act must be construed in light of this basic purpose.” Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2044, 45 L.Ed.2d 84 (1975) (footnotes and citations omitted).

The defendants attach considerable weight to the assertions of numerous academic authors that they do not write primarily for money and that they want their published writings to be freely copyable. The defendants suggest that unlicensed copying will “stimulate artistic creativity for the general public good.”

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This suggestion would be more persuasive if the record did not demonstrate that licensing income is significant to the publishers. It is the publishers who hold the copyrights, of course-and the publishers obviously need economic incentives to publish scholarly works, even if the scholars do not need direct economic incentives to write such works.

The writings of most academic authors, it seems fair to say, lack the general appeal of works by a Walter Lippmann, for example. (Lippmann is the only non-academic author whose writings are involved in this case.) One suspects that the profitability of at least some of the other books at issue here is marginal. If publishers cannot look forward to receiving permission fees, why should they continue publishing marginally profitable books at all? And how will artistic creativity be stimulated if the diminution of economic incentives for publishers to publish academic works means that fewer academic works will be published?

The fact that a liberal photocopying policy may be favored by many academics who are not themselves in the publishing business has little relevance in this connection. As Judge Leval observed in American Geophysical,

“It is not surprising that authors favor liberal photocopying; generally such authors have a far greater interest in the wide dissemination of their work than in royalties-all the more so when they have assigned their royalties to the publisher. But the authors have not risked their capital to achieve dissemination. The publishers have. Once an author has assigned her copyright, her approval or disapproval of photocopying is of no further relevance.” 802 F.Supp. at 27.

In the case at bar the district court was not persuaded that the creation of new works of scholarship would be stimulated by depriving publishers of the revenue stream derived from the sale of permissions. Neither are we. On the contrary, it seems to us, the destruction of this revenue stream can only have a deleterious effect upon the incentive to publish academic writings.

. . .

VIII

The grant of summary judgment on the fair use issue is AFFIRMED. The award of damages is VACATED, and the case is REMANDED for reconsideration of damages and for entry of a separate judgment not inconsistent with this opinion.

Jay Robert NASH v. CBS, INC., et al.

899 F.2d 1537, 1990 (7th Cir. 1990)

Easterbrook, Circuit Judge.

John Dillinger, Public Enemy No. 1, died on July 22, 1934, at the Biograph Theater in Chicago. He emerged from the air conditioned movie palace into a

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swetering evening accompanied by two women, one wearing a bright red dress. The “lady in red”, Anna Sage, had agreed to betray his presence for $10,000. Agents of the FBI were waiting. Alerted by Polly Hamilton, the other woman, Dilliger wheeled to fire, but it was too late. A hail of bullets cut him down, his .45 automatic unused. William C. Sullivan, The Bureau 30-33 (1979). Now a national historic site, the Biograph bears a plaque commemorating the event. It still shows movies, and the air conditioning is no better now than in 1934.

Jay Robert Nash believes that Dillinger did not die at the Biograph. In Dillinger: Dead or Alive? (1970), and The Dillinger Dossier (1983), Nash maintains that Dillinger learned about the trap and dispatched Jimmy Lawrence, a small-time hoodlum who looked like him, in his stead. The FBI, mortified that its set-up had no sting, kept the switch quiet. Nash points to discrepancies between Dillinger's physical characteristics and those of the corpse: Dillinger had a scar on his upper lip and the corpse did not; Dillinger lacked a tooth that the corpse possessed; Dillinger had blue eyes, the corpse brown eyes; Dillinger's eyebrows were thicker than those of the corpse. Although Dillinger's sister identified the dead man, Nash finds the circumstances suspicious, and he is struck by the decision of Dillinger's father to encase the corpse in concrete before burial. As part of the cover-up, according to Nash, the FBI planted Dillinger's fingerprints in the morgue. After interviewing many persons connected with Dillinger's gang and the FBI's pursuit of it, Nash tracked Dillinger to the west coast, where Dillinger married and lay low. Nash believes that he survived at least until 1979. The Dillinger Dossier contains pictures of a middle-aged couple and then an elderly man who, Nash believes, is Dillinger in dotage. Nash provides capsule versions of his conclusions in his Bloodletters and Badmen: A Narrative Encyclopedia of American Criminals from the Pilgrims to the Present (1973), and his exposé Citizen Hoover (1972).

Nash's reconstruction of the Dillinger story has not won adherents among historians-or the FBI. Someone in Hollywood must have read The Dillinger Dossier, however, because in 1984 CBS broadcast an episode of its Simon and Simon series entitled The Dillinger Print. Simon and Simon featured brothers Rick and A.J. Simon, private detectives in San Diego. The district court summarized the episode, 704 F.Supp. 823, 828-29 (N.D.Ill.1989):

The opening scene of The [Dillinger] Print shows Ty Becker, a retired FBI agent, telling his grandchildren about Dillinger's life and the shooting outside the Biograph Theater on July 22, 1934. Ty also mentions that he doubts Dillinger was the man who was shot that night and vows to track him down some day. After the grandchildren leave with his daughter Addie, an intruder breaks into Ty's home, steals an old gun which once belonged to Dillinger, and kills Ty with the gun.

Concerned that the police would regard Ty's death as a typical murder incident to burglary rather than related to moonlighting she suspected he was performing for the FBI, Addie hires the Simons. Next, Addie goes to the bank to remove her father's safety deposit box. While she is in the vault, a masked man, wearing 1930s-style spectator shoes, shoots tear gas into the bank and steals Ty's safety deposit box. The Simons arrive at the bank soon thereafter and pick up the thief's gun, which turns out to be the Dillinger gun stolen from Ty's house. Police investigation later reveals that the gun bears the fresh fingerprint of John Dillinger.

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The Simons are next seen purchasing newspapers which are carrying the story that Dillinger may be alive. As the Simons discuss the case, A.J. reads from a book entitled “Twentieth Century Desperadoes.” He implies that some evidence supports the idea Dillinger is alive and relates to Rick several physical discrepancies between Dillinger and the corpse described in the 1934 autopsy. Nash cites the same discrepancies in his books.

Numerous Dillinger impostors soon come forward, and the FBI enters the case. However, FBI Agent Kinneman, who is a friend of A.J.'s, informs the Simons that Ty Becker was not working for the FBI at the time of his death.

The scene then switches to a health club. As A.J. and Kinneman are playing racquetball, a man wearing a trench coat and spectator shoes enters the club and, from the viewing area, sprays a salvo of bullets over A.J. and Kinneman. Afterwards, A.J. solemnly swears revenge against Dillinger or whoever tried to shoot him.

The next day, the Simons visit the police station and discover that “leads” regarding Dillinger's whereabouts have poured in from all over the world. They agree to check out a few leads, including one that takes them to a dentist in San Diego. The dentist rejects the Simons' suggestion that Dillinger lives in his house and attributes the police tip to a crazy woman who lives across the street.

The Simons and Addie then pay a visit to Ty Becker's old secretary, who informs them that Ty was working on an internal FBI investigation at the time he was killed. Immediately thereafter, the Simons and Addie receive a call from Kinneman, who tells them that “there is more truth to this” Dillinger affair than anyone had imagined and that the Simons should meet him at a closed-down theater.

When the Simons and Addie enter the theater, a gangster documentary is playing. Kinneman and a man wearing spectator shoes shoot at the trio. The Simons eventually kill the man in spectator shoes. They then subdue Kinneman, who admits to killing Ty Becker in order to stop the internal investigation which, it turns out, was directed at Kinneman, and to leaving the fake Dillinger fingerprint on the gun at the bank.

In the penultimate scene, the FBI thanks the Simons for their help in arresting Kinneman and solving the Dillinger mystery. Rick nevertheless insists Dillinger may be alive and perhaps living in Oregon.... The episode closes with a teaser: the dentist, one of the leads whom the Simons had interviewed earlier in the program, is seen pushing his elderly father in a wheelchair and admonishing him to refrain from discussing the “old days in Chicago” anymore.

Nash filed this suit seeking damages on the theory that The Dillinger Print violates his copyrights in the four books setting out his version of Dillinger's escape from death and new life on the west coast. The district court determined that the books' copyrighted material consists in Nash's presentation and exposition, not in any of the historical events. 691 F.Supp. 140 (N.D.Ill.1988). CBS then moved for summary

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judgment, conceding for this purpose both access to Nash's books and copying of the books' factual material. The court granted this motion, 704 F.Supp. 823, holding that The Dillinger Print did not appropriate any of the material protected by Nash's copyrights.

CBS's concession removes from this case two questions that bedevil copyright litigation. See Selle v. Gibb, 741 F.2d 896, 901-02 (7th Cir.1984). It leaves the questions whether the copier used matter that the copyright law protects and, if so, whether it took “too much” (that is, more than allowed by the “fair use” doctrine codified in 17 U.S.C. § 107). See Atari, Inc. v. North American Philips Consumer Electronics Corp., 672 F.2d 607, 614-17 (7th Cir.1982); Toksvig v. Bruce Pub. Co., 181 F.2d 664 (7th Cir.1950). These latter questions have proven especially difficult when, as in this case, the copier works in a medium different from the original.

Learned Hand, whose opinions still dominate this corner of the law, observed in Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir.1930), that all depends on the level of abstraction at which the court conceives the interest protected by the copyright. If the court chooses a low level (say, only the words the first author employed), then a copier may take the plot, exposition, and all other original material, even though these may be the most important ingredients of the first author's contribution. As a practical matter this would mean that anyone could produce the work in a new medium without compensating the original author, despite the statute's grant to the author of the privilege to make “derivative works”. If on the other hand the court should select a high level of abstraction, the first author may claim protection for whole genres of work (“the romantic novel” or, more modestly, any story involving doomed young lovers from warring clans, so that a copyright on Romeo and Juliet would cover West Side Story too). Even a less sweeping degree of abstraction creates a risk of giving copyright protection to “the idea” although the statute protects only “expression”. 17 U.S.C. § 102(b); Holmes v. Hurst, 174 U.S. 82, 86, 19 S.Ct. 606, 607, 43 L.Ed. 904 (1899); Mazer v. Stein, 347 U.S. 201, 217-18, 74 S.Ct. 460, 470, 98 L.Ed. 630 (1954); Rockford Map Publishers, Inc. v. Directory Service Co., 768 F.2d 145 (7th Cir.1985); Miller v. Universal City Studios, Inc., 650 F.2d 1365 (5th Cir.1981); United Telephone Co. v. Johnson Publishing Co., 855 F.2d 604, 608-09 (8th Cir.1988).

Sometimes called the “abstractions test”, Hand's insight is not a “test” at all. It is a clever way to pose the difficulties that require courts to avoid either extreme of the continuum of generality. It does little to help resolve a given case, even when melded with Hand's further observation, in cases such as Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir.1960), that one may ask what the “ordinary observer” would think are the essential parts of the two works' “aesthetic appeal”. See also Selle, 741 F.2d at 903-05. Who is the “ordinary” observer, and how does this person choose the level of generality? Ordinary observers, like reasonable men in torts, are fictitious characters of the law, reminders that judges must apply objective tests rather than examine their own perceptions. They do not answer the essential question: at what level of generality? After 200 years of wrestling with copyright questions, it is unlikely that courts will come up with the answer any time soon, if indeed there is “an” answer, which we doubt.

Hand returned again and again to the opposing forces that make the

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formulation of a single approach so difficult. Intellectual (and artistic) progress is possible only if each author builds on the work of others. No one invents even a tiny fraction of the ideas that make up our cultural heritage. Once a work has been written and published, any rule requiring people to compensate the author slows progress in literature and art, making useful expressions “too expensive”, forcing authors to re-invent the wheel, and so on. Every work uses scraps of thought from thousands of predecessors, far too many to compensate even if the legal system were frictionless, which it isn't. Because any new work depends on others even if unconsciously, broad protection of intellectual property also creates a distinct possibility that the cost of litigation—old authors trying to get a “piece of the action” from current successes—will prevent or penalize the production of new works, even though the claims be rebuffed. Authors as a group therefore might prefer limited protection for their writings—they gain in the ability to use others' works more than they lose in potential royalties. See William M. Landes & Richard A. Posner, An Economic Analysis of Copyright Law, 18 J. Legal Studies 325, 332-33, 349-59 (1989).

Yet to deny authors all reward for the value their labors contribute to the works of others also will lead to inefficiently little writing, just as surely as excessively broad rights will do. The prospect of reward is an important stimulus for thinking and writing, especially for persons such as Nash who are full-time authors. Before the first work is published, broad protection of intellectual property seems best; after it is published, narrow protection seems best. At each instant some new works are in progress, and every author is simultaneously a creator in part and a borrower in part. In these roles, the same person has different objectives. Yet only one rule can be in force. This single rule must achieve as much as possible of these inconsistent demands. Neither Congress nor the courts has the information that would allow it to determine which is best. Both institutions must muddle through, using not a fixed rule but a sense of the consequences of moving dramatically in either direction.

If Nash had written a novel that another had translated into a screenplay, this would be a difficult case. Although The Dillinger Print is substantially original, it does not matter that almost all of the second author's expression is new. “[N]o plagiarist can excuse the wrong by showing how much of his work he did not pirate.” Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 56 (2d Cir.1936) (L. Hand, J.). The TV drama took from Nash's works the idea that Dillinger survived and retired to the west coast, and employed many of the ingredients that Nash used to demonstrate that the man in the Cook County morgue was not Dillinger. CBS even used one of Nash's books as a prop: “Twentieth Century Desperadoes” in The Dillinger Print is a ringer for Nash's Bloodletters and Badmen. To see that The Dillinger Print is in a sense a “derivative work”, we need only imagine how we would react if Nash had written a short story based on the premise that Dillinger was really a woman masquerading as a man, and CBS had used a switch in sex roles as the centerpiece of a drama. In such an event we would need to decide, as Hand did in Sheldon, whether the portions CBS took over were qualitatively so important that the original author's market would be diminished excessively by a rule allowing similar appropriations in the regular course.

Nash does not portray The Dillinger Dossier and its companion works as fiction, however, which makes all the difference. The inventor of Sherlock Holmes

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controls that character's fate while the copyright lasts; the first person to conclude that Dillinger survived does not get dibs on history. If Dillinger survived, that fact is available to all. Nash's rights lie in his expression: in his words, in his arrangement of facts (his deployment of narration interspersed with interviews, for example), but not in the naked “truth”. The Dillinger Print does not use any words from The Dillinger Dossier or Nash's other books; it does not take over any of Nash's presentation but instead employs a setting of its own invention with new exposition and development. Physical differences between Dillinger and the corpse, planted fingerprints, photographs of Dillinger and other gangsters in the 1930s, these and all the rest are facts as Nash depicts them. (Nash did not take the photographs and has no rights in them; The Dillinger Print used the photos but not Nash's arrangement of them.)

The cases closest to ours are not plays translated to the movie screen (as in Sheldon ) but movies made from speculative works representing themselves as fact. For example, Universal made a motion picture based on the premise that an idealistic crewman planted a bomb that destroyed the dirigible Hindenburg on May 6, 1937. The theory came straight from A.A. Hoehling's Who Destroyed the Hindenburg? (1962), a monograph based on exhaustive research. The motion picture added sub-plots and development, but the thesis and the evidence adduced in support of it could be traced to Hoehling. Nonetheless, the Second Circuit concluded that this did not infringe Hoehling's rights, because the book placed the facts (as opposed to Hoehling's exposition) in the public domain. Hoehling v. Universal City Studios, Inc., 618 F.2d 972 (1980). See also Miller v. Universal City Studios (facts about a notorious kidnapping are not protected by copyright). Cf. Musto v. Meyer, 434 F.Supp. 32 (S.D.N.Y.1977) (idea for The Seven Per Cent Solution derived from article in medical journal).

Hoehling suggested that “[t]o avoid a chilling effect on authors who contemplate tackling an historical issue or event, broad latitude must be granted to subsequent authors who make use of historical subject matter, including theories or plots”. 618 F.2d at 978. As our opinion in Toksvig shows, we are not willing to say that “anything goes” as long as the first work is about history. Toksvig held that the author of a biography of Hans Christian Andersen infringed the copyright of the author of an earlier biography by using portions of Andersen's letters as well as some of the themes and structure. Hoehling rejected Toksvig, see 618 F.2d at 979, concluding that “[k]nowledge is expanded ... by granting new authors of historical works a relatively free hand to build upon the work of their predecessors.” Id. at 980 (footnote omitted). With respect for our colleagues of the east, we think this goes to the extreme of looking at incentives only ex post. The authors in Hoehling and Toksvig spent years tracking down leads. If all of their work, right down to their words, may be used without compensation, there will be too few original investigations, and facts will not be available on which to build.

In Toksvig the first author, who knew Danish, spent three years learning about Andersen's life; the second author, who knew no Danish, wrote her biography in less than a year by copying out of the first book scenes and letters that the original author discovered or translated. Reducing the return on such effort, by allowing unhindered use, would make the initial leg-work less attractive and so less frequent. Copyright law does not protect hard work (divorced from expression), and

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hard work is not an essential ingredient of copyrightable expression (see Rockford Map ); to the extent Toksvig confuses work or ideas with expression, it has been justly criticized. Rosemont Enterprises, Inc. v. Random House, Inc., 366 F.2d 303, 310 (2d Cir.1966); Miller v. Universal City Studios, 650 F.2d at 1371; William F. Patry, The Fair Use Privilege in Copyright Law 65-70 (1985). See also Eisenschiml v. Fawcett Publications, Inc., 246 F.2d 598, 604 (7th Cir.1957) (recognizing both that any two treatments of the same historical subject will be similar because the facts limit the author's freedom, and that a scholar is entitled to use a predecessor's work). We need not revisit Toksvig on its own facts to know that it is a mistake to hitch up at either pole of the continuum between granting the first author a right to forbid all similar treatments of history and granting the second author a right to use anything he pleases of the first's work. Cf. New Era Publications v. Henry Holt & Co., 873 F.2d 576 (2d Cir.), rehearing en banc denied, 884 F.2d 659 (1989).

Authors of fiction do not (necessarily) need greater incentives than authors of non-fiction. Users of and elaborators on works of non-fiction are not (necessarily) more easily dissuaded than are those who use or elaborate on works of fiction. Decisions such as Hoehling do not come straight from first principles. They depend, rather, on the language of what is now 17 U.S.C. § 102(b): “In no case does copyright protection for an original work ... extend to any idea, ... or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” Long before the 1976 revision of the statute, courts had decided that historical facts are among the “ideas” and “discoveries” that the statute does not cover. International News Service v. Associated Press, 248 U.S. 215, 234, 39 S.Ct. 68, 71, 63 L.Ed. 211 (1918). This is not a natural law; Congress could have made copyright broader (as patent law is). But it is law, which will come as no surprise to Nash. His own books are largely fresh expositions of facts looked up in other people's books. Consider the introduction to the bibliography in Murder, America: Homicide in the United States from the Revolution to the Present 447 (1980):

The research for this book was done in libraries and archives throughout the United States, in addition to interviews and lengthy correspondence. The author's own files, exceeding more than a quarter of a million separate entries and a personal crime library of more than 25,000 volumes, were heavily employed.

The producers of Simon and Simon used Nash's work as Nash has used others': as a source of facts and ideas, to which they added their distinctive overlay. As the district court found, CBS did no more than § 102(b) permits. Because The Dillinger Print uses Nash's analysis of history but none of his expression, the judgment is affirmed.

Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.

125 S.Ct. 2764 (2005)

Justice SOUTER delivered the opinion of the Court.

The question is under what circumstances the distributor of a product capable of both lawful and unlawful use is liable for acts of copyright infringement

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by third parties using the product. We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.

I

A

Respondents, Grokster, Ltd., and StreamCast Networks, Inc., defendants in the trial court, distribute free software products that allow computer users to share electronic files through peer-to-peer networks, so called because users' computers communicate directly with each other, not through central servers. The advantage of peer-to-peer networks over information networks of other types shows up in their substantial and growing popularity. Because they need no central computer server to mediate the exchange of information or files among users, the high-bandwidth communications capacity for a server may be dispensed with, and the need for costly server storage space is eliminated. Since copies of a file (particularly a popular one) are available on many users' computers, file requests and retrievals may be faster than on other types of networks, and since file exchanges do not travel through a server, communications can take place between any computers that remain connected to the network without risk that a glitch in the server will disable the network in its entirety. Given these benefits in security, cost, and efficiency, peer-to-peer networks are employed to store and distribute electronic files by universities, government agencies, corporations, and libraries, among others.13

Other users of peer-to-peer networks include individual recipients of Grokster's and StreamCast's software, and although the networks that they enjoy through using the software can be used to share any type of digital file, they have prominently employed those networks in sharing copyrighted music and video files without authorization. A group of copyright holders (MGM for short, but including motion picture studios, recording companies, songwriters, and music publishers) sued Grokster and StreamCast for their users' copyright infringements, alleging that they knowingly and intentionally distributed their software to enable users to reproduce and distribute the copyrighted works in violation of the Copyright Act. . . . MGM sought damages and an injunction.

Discovery during the litigation revealed the way the software worked, the business aims of each defendant company, and the predilections of the users. Grokster's eponymous software employs what is known as FastTrack technology, a 313 Peer-to-peer networks have disadvantages as well. Searches on peer-to-peer networks may not reach and uncover all available files because search requests may not be transmitted to every computer on the network. There may be redundant copies of popular files. The creator of the software has no incentive to minimize storage or bandwidth consumption, the costs of which are borne by every user of the network. Most relevant here, it is more difficult to control the content of files available for retrieval and the behavior of users.

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protocol developed by others and licensed to Grokster. StreamCast distributes a very similar product except that its software, called Morpheus, relies on what is known as Gnutella technology. A user who downloads and installs either software possesses the protocol to send requests for files directly to the computers of others using software compatible with FastTrack or Gnutella. On the FastTrack network opened by the Grokster software, the user's request goes to a computer given an indexing capacity by the software and designated a supernode, or to some other computer with comparable power and capacity to collect temporary indexes of the files available on the computers of users connected to it. The supernode (or indexing computer) searches its own index and may communicate the search request to other supernodes. If the file is found, the supernode discloses its location to the computer requesting it, and the requesting user can download the file directly from the computer located. The copied file is placed in a designated sharing folder on the requesting user's computer, where it is available for other users to download in turn, along with any other file in that folder.

In the Gnutella network made available by Morpheus, the process is mostly the same, except that in some versions of the Gnutella protocol there are no supernodes. In these versions, peer computers using the protocol communicate directly with each other. When a user enters a search request into the Morpheus software, it sends the request to computers connected with it, which in turn pass the request along to other connected peers. The search results are communicated to the requesting computer, and the user can download desired files directly from peers’ computers. As this description indicates, Grokster and StreamCast use no servers to intercept the content of the search requests or to mediate the file transfers conducted by users of the software, there being no central point through which the substance of the communications passes in either direction.

Although Grokster and StreamCast do not therefore know when particular files are copied, a few searches using their software would show what is available on the networks the software reaches. MGM commissioned a statistician to conduct a systematic search, and his study showed that nearly 90% of the files available for download on the FastTrack system were copyrighted works. Grokster and StreamCast dispute this figure, raising methodological problems and arguing that free copying even of copyrighted works may be authorized by the rightholders. They also argue that potential noninfringing uses of their software are significant in kind, even if infrequent in practice. Some musical performers, for example, have gained new audiences by distributing their copyrighted works for free across peer-to-peer networks, and some distributors of unprotected content have used peer-to-peer networks to disseminate files, Shakespeare being an example. Indeed, StreamCast has given Morpheus users the opportunity to download the briefs in this very case, though their popularity has not been quantified.

As for quantification, the parties' anecdotal and statistical evidence entered thus far to show the content available on the FastTrack and Gnutella networks does not say much about which files are actually downloaded by users, and no one can say how often the software is used to obtain copies of unprotected material. But MGM's evidence gives reason to think that the vast majority of users' downloads are acts of infringement, and because well over 100 million copies of the software in question are known to have been downloaded, and billions of files are shared across

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the FastTrack and Gnutella networks each month, the probable scope of copyright infringement is staggering.

Grokster and StreamCast concede the infringement in most downloads, and it is uncontested that they are aware that users employ their software primarily to download copyrighted files, even if the decentralized FastTrack and Gnutella networks fail to reveal which files are being copied, and when. From time to time, moreover, the companies have learned about their users' infringement directly, as from users who have sent e-mail to each company with questions about playing copyrighted movies they had downloaded, to whom the companies have responded with guidance. And MGM notified the companies of 8 million copyrighted files that could be obtained using their software.

Grokster and StreamCast are not, however, merely passive recipients of information about infringing use. The record is replete with evidence that from the moment Grokster and StreamCast began to distribute their free software, each one clearly voiced the objective that recipients use it to download copyrighted works, and each took active steps to encourage infringement.

After the notorious file-sharing service, Napster, was sued by copyright holders for facilitation of copyright infringement, A & M Records, Inc. v. Napster, Inc., 114 F.Supp.2d 896 (N.D.Cal.2000), aff'd in part, rev'd in part, 239 F.3d 1004 (C.A.9 2001), StreamCast gave away a software program of a kind known as OpenNap, designed as compatible with the Napster program and open to Napster users for downloading files from other Napster and OpenNap users' computers. Evidence indicates that “[i]t was always [StreamCast's] intent to use [its OpenNap network] to be able to capture email addresses of [its] initial target market so that [it] could promote [its] StreamCast Morpheus interface to them,”; indeed, the OpenNap program was engineered “‘to leverage Napster's 50 million user base.”

StreamCast monitored both the number of users downloading its OpenNap program and the number of music files they downloaded. It also used the resulting OpenNap network to distribute copies of the Morpheus software and to encourage users to adopt it. Internal company documents indicate that StreamCast hoped to attract large numbers of former Napster users if that company was shut down by court order or otherwise, and that StreamCast planned to be the next Napster. A kit developed by StreamCast to be delivered to advertisers, for example, contained press articles about StreamCast's potential to capture former Napster users, and it introduced itself to some potential advertisers as a company “which is similar to what Napster was.” It broadcast banner advertisements to users of other Napster-compatible software, urging them to adopt its OpenNap. An internal e-mail from a company executive stated: “‘We have put this network in place so that when Napster pulls the plug on their free service ... or if the Court orders them shut down prior to that ... we will be positioned to capture the flood of their 32 million users that will be actively looking for an alternative.’” Thus, StreamCast developed promotional materials to market its service as the best Napster alternative. One proposed advertisement read: “Napster Inc. has announced that it will soon begin charging you a fee. That's if the courts don't order it shut down first. What will you do to get around it?” Another proposed ad touted StreamCast's software as the “# 1 alternative to Napster” and asked “[w]hen the lights went off at Napster ... where

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did the users go?” (ellipsis in original).7 StreamCast even planned to flaunt the illegal uses of its software; when it launched the OpenNap network, the chief technology officer of the company averred that “[t]he goal is to get in trouble with the law and get sued. It's the best way to get in the new[s].”

The evidence that Grokster sought to capture the market of former Napster users is sparser but revealing, for Grokster launched its own OpenNap system called Swaptor and inserted digital codes into its Web site so that computer users using Web search engines to look for “Napster” or “[f]ree filesharing” would be directed to the Grokster Web site, where they could download the Grokster software. And Grokster's name is an apparent derivative of Napster.

StreamCast's executives monitored the number of songs by certain commercial artists available on their networks, and an internal communication indicates they aimed to have a larger number of copyrighted songs available on their networks than other file-sharing networks. The point, of course, would be to attract users of a mind to infringe, just as it would be with their promotional materials developed showing copyrighted songs as examples of the kinds of files available through Morpheus. Morpheus in fact allowed users to search specifically for “Top 40” songs, which were inevitably copyrighted. Similarly, Grokster sent users a newsletter promoting its ability to provide particular, popular copyrighted materials.

In addition to this evidence of express promotion, marketing, and intent to promote further, the business models employed by Grokster and StreamCast confirm that their principal object was use of their software to download copyrighted works. Grokster and StreamCast receive no revenue from users, who obtain the software itself for nothing. Instead, both companies generate income by selling advertising space, and they stream the advertising to Grokster and Morpheus users while they are employing the programs. As the number of users of each program increases, advertising opportunities become worth more. While there is doubtless some demand for free Shakespeare, the evidence shows that substantive volume is a function of free access to copyrighted work. Users seeking Top 40 songs, for example, or the latest release by Modest Mouse, are certain to be far more numerous than those seeking a free Decameron, and Grokster and StreamCast translated that demand into dollars.

Finally, there is no evidence that either company made an effort to filter copyrighted material from users' downloads or otherwise impede the sharing of copyrighted files. Although Grokster appears to have sent e-mails warning users about infringing content when it received threatening notice from the copyright holders, it never blocked anyone from continuing to use its software to share copyrighted files. StreamCast not only rejected another company's offer of help to monitor infringement, but blocked the Internet Protocol addresses of entities it believed were trying to engage in such monitoring on its networks.

77The record makes clear that StreamCast developed these promotional materials but not whether it released them to the public. Even if these advertisements were not released to the public and do not show encouragement to infringe, they illuminate StreamCast's purposes

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B

After discovery, the parties on each side of the case cross-moved for summary judgment. The District Court . . . held that those who used the Grokster and Morpheus software to download copyrighted media files directly infringed MGM's copyrights, a conclusion not contested on appeal, but the court nonetheless granted summary judgment in favor of Grokster and StreamCast as to any liability arising from distribution of the then current versions of their software. Distributing that software gave rise to no liability in the court's view, because its use did not provide the distributors with actual knowledge of specific acts of infringement.

The Court of Appeals affirmed. In the court's analysis, a defendant was liable as a contributory infringer when it had knowledge of direct infringement and materially contributed to the infringement. But the court read Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), as holding that distribution of a commercial product capable of substantial noninfringing uses could not give rise to contributory liability for infringement unless the distributor had actual knowledge of specific instances of infringement and failed to act on that knowledge. The fact that the software was capable of substantial noninfringing uses in the Ninth Circuit's view meant that Grokster and StreamCast were not liable, because they had no such actual knowledge, owing to the decentralized architecture of their software. The court also held that Grokster and StreamCast did not materially contribute to their users' infringement because it was the users themselves who searched for, retrieved, and stored the infringing files, with no involvement by the defendants beyond providing the software in the first place.

The Ninth Circuit also considered whether Grokster and StreamCast could be liable under a theory of vicarious infringement. The court held against liability because the defendants did not monitor or control the use of the software, had no agreed-upon right or current ability to supervise its use, and had no independent duty to police infringement. We granted certiorari.

II

A

MGM and many of the amici fault the Court of Appeals's holding for upsetting a sound balance between the respective values of supporting creative pursuits through copyright protection and promoting innovation in new communication technologies by limiting the incidence of liability for copyright infringement. The more artistic protection is favored, the more technological innovation may be discouraged; the administration of copyright law is an exercise in managing the trade-off. [cit.]

The tension between the two values is the subject of this case, with its claim that digital distribution of copyrighted material threatens copyright holders as never before, because every copy is identical to the original, copying is easy, and many people (especially the young) use file-sharing software to download copyrighted works. This very breadth of the software's use may well draw the public directly into the debate over copyright policy, and the indications are that the ease of

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copying songs or movies using software like Grokster's and Napster's is fostering disdain for copyright protection. As the case has been presented to us, these fears are said to be offset by the different concern that imposing liability, not only on infringers but on distributors of software based on its potential for unlawful use, could limit further development of beneficial technologies.8

The argument for imposing indirect liability in this case is, however, a powerful one, given the number of infringing downloads that occur every day using StreamCast's and Grokster's software. When a widely shared service or product is used to commit infringement, it may be impossible to enforce rights in the protected work effectively against all direct infringers, the only practical alternative being to go against the distributor of the copying device for secondary liability on a theory of contributory or vicarious infringement. See In re Aimster Copyright Litigation, 334 F.3d 643, 645-646 (C.A.7 2003).One infringes contributorily by intentionally inducing or encouraging direct infringement, see Gershwin Pub. Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (C.A.2 1971), and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it, Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 307 (C.A.2 1963).9 Although “[t]he Copyright Act does not expressly render anyone liable for infringement committed by another,” Sony Corp. v. Universal City Studios, 464 U.S., at 434, these doctrines of secondary liability emerged from common law principles and are well established in the law, id., at 486 (Blackmun, J., dissenting); [cit.].

B

Despite the currency of these principles of secondary liability, this Court has dealt with secondary copyright infringement in only one recent case, and because MGM has tailored its principal claim to our opinion there, a look at our earlier holding is in order. In Sony Corp. v. Universal City Studios, this Court addressed a claim that secondary liability for infringement can arise from the very distribution of a commercial product. There, the product, novel at the time, was what we know

88The mutual exclusivity of these values should not be overstated, however. On the one hand technological innovators, including those writing file-sharing computer programs, may wish for effective copyright protections for their work [cit.] On the other hand the widespread distribution of creative works through improved technologies may enable the synthesis of new works or generate audiences for emerging artists. [cit.]99We stated in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), that “‘the lines between direct infringement, contributory infringement and vicarious liability are not clearly drawn’ ....[R]easoned analysis of [the Sony plaintiffs' contributory infringement claim] necessarily entails consideration of arguments and case law which may also be forwarded under the other labels, and indeed the parties ... rely upon such arguments and authority in support of their respective positions on the issue of contributory infringement,” [cit]. In the present case MGM has argued a vicarious liability theory, which allows imposition of liability when the defendant profits directly from the infringement and has a right and ability to supervise the direct infringer, even if the defendant initially lacks knowledge of the infringement. [cit.] Because we resolve the case based on an inducement theory, there is no need to analyze separately MGM's vicarious liability theory.

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today as the videocassette recorder or VCR. Copyright holders sued Sony as the manufacturer, claiming it was contributorily liable for infringement that occurred when VCR owners taped copyrighted programs because it supplied the means used to infringe, and it had constructive knowledge that infringement would occur. At the trial on the merits, the evidence showed that the principal use of the VCR was for “ ‘time-shifting,’ ” or taping a program for later viewing at a more convenient time, which the Court found to be a fair, not an infringing, use. There was no evidence that Sony had expressed an object of bringing about taping in violation of copyright or had taken active steps to increase its profits from unlawful taping. Although Sony's advertisements urged consumers to buy the VCR to “‘record favorite shows'” or “ ‘build a library’ ” of recorded programs, neither of these uses was necessarily infringing.

On those facts, with no evidence of stated or indicated intent to promote infringing uses, the only conceivable basis for imposing liability was on a theory of contributory infringement arising from its sale of VCRs to consumers with knowledge that some would use them to infringe. But because the VCR was “capable of commercially significant noninfringing uses,” we held the manufacturer could not be faulted solely on the basis of its distribution.

This analysis reflected patent law's traditional staple article of commerce doctrine, now codified, that distribution of a component of a patented device will not violate the patent if it is suitable for use in other ways. 35 U.S.C. § 271(c); [cit]. The doctrine was devised to identify instances in which it may be presumed from distribution of an article in commerce that the distributor intended the article to be used to infringe another's patent, and so may justly be held liable for that infringement. “One who makes and sells articles which are only adapted to be used in a patented combination will be presumed to intend the natural consequences of his acts; he will be presumed to intend that they shall be used in the combination of the patent.” [cit.]

In sum, where an article is “good for nothing else” but infringement, [cit.], there is no legitimate public interest in its unlicensed availability, and there is no injustice in presuming or imputing an intent to infringe. [cit]. Conversely, the doctrine absolves the equivocal conduct of selling an item with substantial lawful as well as unlawful uses, and limits liability to instances of more acute fault than the mere understanding that some of one's products will be misused. It leaves breathing room for innovation and a vigorous commerce. See Sony Corp. v. Universal City Studios, supra, at 442; [cit].

The parties and many of the amici in this case think the key to resolving it is the Sony rule and, in particular, what it means for a product to be “capable of commercially significant noninfringing uses.” Sony Corp. v. Universal City Studios, supra, at 442. MGM advances the argument that granting summary judgment to Grokster and StreamCast as to their current activities gave too much weight to the value of innovative technology, and too little to the copyrights infringed by users of their software, given that 90% of works available on one of the networks was shown to be copyrighted. Assuming the remaining 10% to be its noninfringing use, MGM says this should not qualify as “substantial,” and the Court should quantify Sony to the extent of holding that a product used “principally” for infringement does not

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qualify. As mentioned before, Grokster and StreamCast reply by citing evidence that their software can be used to reproduce public domain works, and they point to copyright holders who actually encourage copying. Even if infringement is the principal practice with their software today, they argue, the noninfringing uses are significant and will grow.

We agree with MGM that the Court of Appeals misapplied Sony, which it read as limiting secondary liability quite beyond the circumstances to which the case applied. Sony barred secondary liability based on presuming or imputing intent to cause infringement solely from the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement. The Ninth Circuit has read Sony's limitation to mean that whenever a product is capable of substantial lawful use, the producer can never be held contributorily liable for third parties' infringing use of it; it read the rule as being this broad, even when an actual purpose to cause infringing use is shown by evidence independent of design and distribution of the product, unless the distributors had “specific knowledge of infringement at a time at which they contributed to the infringement, and failed to act upon that information.” Because the Circuit found the StreamCast and Grokster software capable of substantial lawful use, it concluded on the basis of its reading of Sony that neither company could be held liable, since there was no showing that their software, being without any central server, afforded them knowledge of specific unlawful uses.This view of Sony, however, was error, converting the case from one about liability resting on imputed intent to one about liability on any theory. Because Sony did not displace other theories of secondary liability, and because we find below that it was error to grant summary judgment to the companies on MGM's inducement claim, we do not revisit Sony further, as MGM requests, to add a more quantified description of the point of balance between protection and commerce when liability rests solely on distribution with knowledge that unlawful use will occur. It is enough to note that the Ninth Circuit's judgment rested on an erroneous understanding of Sony and to leave further consideration of the Sony rule for a day when that may be required.

C

Sony's rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from the common law.10 Sony Corp. v. Universal City Studios, 464 U.S., at 439 (“If vicarious liability is to be imposed on Sony in this case, it must rest on the fact that it has sold equipment with constructive knowledge” of the potential for infringement). Thus, where evidence goes beyond a product's characteristics or the knowledge that it may be put to infringing uses, and shows statements or actions directed to promoting infringement, Sony's staple-article rule will not preclude liability.

The classic case of direct evidence of unlawful purpose occurs when one induces commission of infringement by another, or “entic[es] or persuad[es]

010Nor does the Patent Act's exemption from liability for those who distribute a staple article of commerce, 35 U.S.C. § 271(c), extend to those who induce patent infringement, § 271(b).

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another” to infringe, Black's Law Dictionary 790 (8th ed.2004), as by advertising. Thus at common law a copyright or patent defendant who “not only expected but invoked [infringing use] by advertisement” was liable for infringement “on principles recognized in every part of the law.” Kalem Co. v. Harper Brothers, 222 U.S., at 62-63 (copyright infringement). See also Henry v. A.B. Dick Co., 224 U.S., at 48-49 (contributory liability for patent infringement may be found where a good's “most conspicuous use is one which will co-operate in an infringement when sale to such user is invoked by advertisement” of the infringing use); [cit]; Rumford Chemical Works v. Hecker, 20 F.Cas. 1342, 1346 (No. 12,133) (C.C.D.N.J.1876) (demonstrations of infringing activity along with “avowals of the [infringing] purpose and use for which it was made” supported liability for patent infringement).

The rule on inducement of infringement as developed in the early cases is no different today. Evidence of “active steps ... taken to encourage direct infringement,” Oak Industries, Inc. v. Zenith Electronics Corp., 697 F.Supp. 988, 992 (N.D.Ill.1988), such as advertising an infringing use or instructing how to engage in an infringing use, show an affirmative intent that the product be used to infringe, and a showing that infringement was encouraged overcomes the law's reluctance to find liability when a defendant merely sells a commercial product suitable for some lawful use, [cit.]For the same reasons that Sony took the staple-article doctrine of patent law as a model for its copyright safe-harbor rule, the inducement rule, too, is a sensible one for copyright. We adopt it here, holding that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. We are, of course, mindful of the need to keep from trenching on regular commerce or discouraging the development of technologies with lawful and unlawful potential. Accordingly, just as Sony did not find intentional inducement despite the knowledge of the VCR manufacturer that its device could be used to infringe, mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise.

III

A

The only apparent question about treating MGM's evidence as sufficient to withstand summary judgment under the theory of inducement goes to the need on MGM's part to adduce evidence that StreamCast and Grokster communicated an inducing message to their software users. The classic instance of inducement is by advertisement or solicitation that broadcasts a message designed to stimulate others to commit violations. MGM claims that such a message is shown here. It is undisputed that StreamCast beamed onto the computer screens of users of Napster-compatible programs ads urging the adoption of its OpenNap program, which was designed, as its name implied, to invite the custom of patrons of Napster,

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then under attack in the courts for facilitating massive infringement. Those who accepted StreamCast's OpenNap program were offered software to perform the same services, which a factfinder could conclude would readily have been understood in the Napster market as the ability to download copyrighted music files. Grokster distributed an electronic newsletter containing links to articles promoting its software's ability to access popular copyrighted music. And anyone whose Napster or free file-sharing searches turned up a link to Grokster would have understood Grokster to be offering the same file-sharing ability as Napster, and to the same people who probably used Napster for infringing downloads; that would also have been the understanding of anyone offered Grokster's suggestively named Swaptor software, its version of OpenNap. And both companies communicated a clear message by responding affirmatively to requests for help in locating and playing copyrighted materials.

In StreamCast's case, of course, the evidence just described was supplemented by other unequivocal indications of unlawful purpose in the internal communications and advertising designs aimed at Napster users (“When the lights went off at Napster ... where did the users go?”). Whether the messages were communicated is not to the point on this record. The function of the message in the theory of inducement is to prove by a defendant's own statements that his unlawful purpose disqualifies him from claiming protection (and incidentally to point to actual violators likely to be found among those who hear or read the message). Proving that a message was sent out, then, is the preeminent but not exclusive way of showing that active steps were taken with the purpose of bringing about infringing acts, and of showing that infringing acts took place by using the device distributed. Here, the summary judgment record is replete with other evidence that Grokster and StreamCast, unlike the manufacturer and distributor in Sony, acted with a purpose to cause copyright violations by use of software suitable for illegal use.

Three features of this evidence of intent are particularly notable. First, each company showed itself to be aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users. StreamCast's internal documents made constant reference to Napster, it initially distributed its Morpheus software through an OpenNap program compatible with Napster, it advertised its OpenNap program to Napster users, and its Morpheus software functions as Napster did except that it could be used to distribute more kinds of files, including copyrighted movies and software programs. Grokster's name is apparently derived from Napster, it too initially offered an OpenNap program, its software's function is likewise comparable to Napster's, and it attempted to divert queries for Napster onto its own Web site. Grokster and StreamCast's efforts to supply services to former Napster users, deprived of a mechanism to copy and distribute what were overwhelmingly infringing files, indicate a principal, if not exclusive, intent on the part of each to bring about infringement.Second, this evidence of unlawful objective is given added significance by MGM's showing that neither company attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software. While the Ninth Circuit treated the defendants' failure to develop such tools as irrelevant because they lacked an independent duty to monitor their users' activity, we think this

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evidence underscores Grokster's and StreamCast's intentional facilitation of their users' infringement.12

Third, there is a further complement to the direct evidence of unlawful objective. It is useful to recall that StreamCast and Grokster make money by selling advertising space, by directing ads to the screens of computers employing their software. As the record shows, the more the software is used, the more ads are sent out and the greater the advertising revenue becomes. Since the extent of the software's use determines the gain to the distributors, the commercial sense of their enterprise turns on high-volume use, which the record shows is infringing. This evidence alone would not justify an inference of unlawful intent, but viewed in the context of the entire record its import is clear.

The unlawful objective is unmistakable.

B

In addition to intent to bring about infringement and distribution of a device suitable for infringing use, the inducement theory of course requires evidence of actual infringement by recipients of the device, the software in this case. As the account of the facts indicates, there is evidence of infringement on a gigantic scale, and there is no serious issue of the adequacy of MGM's showing on this point in order to survive the companies' summary judgment requests. Although an exact calculation of infringing use, as a basis for a claim of damages, is subject to dispute, there is no question that the summary judgment evidence is at least adequate to entitle MGM to go forward with claims for damages and equitable relief.

* * *

In sum, this case is significantly different from Sony and reliance on that case to rule in favor of StreamCast and Grokster was error. Sony dealt with a claim of liability based solely on distributing a product with alternative lawful and unlawful uses, with knowledge that some users would follow the unlawful course. The case struck a balance between the interests of protection and innovation by holding that the product's capability of substantial lawful employment should bar the imputation of fault and consequent secondary liability for the unlawful acts of others.

MGM's evidence in this case most obviously addresses a different basis of liability for distributing a product open to alternative uses. Here, evidence of the distributors' words and deeds going beyond distribution as such shows a purpose to cause and profit from third-party acts of copyright infringement. If liability for inducing infringement is ultimately found, it will not be on the basis of presuming or imputing fault, but from inferring a patently illegal objective from statements and actions showing what that objective was.

212Of course, in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor

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There is substantial evidence in MGM's favor on all elements of inducement, and summary judgment in favor of Grokster and StreamCast was error. On remand, reconsideration of MGM's motion for summary judgment will be in order.

The judgment of the Court of Appeals is vacated, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice GINSBURG, with whom THE CHIEF JUSTICE and Justice KENNEDY join, concurring

I concur in the Court's decision, which vacates in full the judgment of the Court of Appeals for the Ninth Circuit, and write separately to clarify why I conclude that the Court of Appeals misperceived, and hence misapplied, our holding in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984). There is here at least a “genuine issue as to [a] material fact,” on the liability of Grokster or StreamCast, not only for actively inducing copyright infringement, but also or alternatively, based on the distribution of their software products, for contributory copyright infringement. On neither score was summary judgment for Grokster and StreamCast warranted.. . . .

[T]he [Sony] Court considered whether “a significant number of [potential uses of the Betamax were] noninfringing.” The Court homed in on one potential use-private, noncommercial time-shifting of television programs in the home (i.e., recording a broadcast TV program for later personal viewing). Time-shifting was noninfringing, the Court concluded, because in some cases trial testimony showed it was authorized by the copyright holder, and in others it qualified as legitimate fair use. Most purchasers used the Betamax principally to engage in time-shifting, a use that “plainly satisfie[d]” the Court's standard. Thus, there was no need in Sony to “give precise content to the question of how much [actual or potential] use is commercially significant.”1 Further development was left for later days and cases.

11Justice Breyer finds in Sony Corp. of America v. Universal City Studios, Inc., a “clear” rule permitting contributory liability for copyright infringement based on distribution of a product only when the product “will be used almost exclusively to infringe copyrights.” Post, at 2791. . . Sony, as I read it, contains no clear, near-exclusivity test. Nor have Courts of Appeals unanimously recognized Justice Breyer's clear rule. Compare A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1021 (C.A.9 2001) (“[E]vidence of actual knowledge of specific acts of infringement is required to hold a computer system operator liable for contributory copyright infringement.”), with In re Aimster Copyright Litigation, 334 F.3d 643, 649-650 (C.A.7 2003) (“[W]hen a supplier is offering a product or service that has noninfringing as well as infringing uses, some estimate of the respective magnitudes of these uses is necessary for a finding of contributory infringement. ... But the balancing of costs and benefits is necessary only in a case in which substantial noninfringing uses, present or prospective, are demonstrated.”). See also Matthew Bender & Co., Inc. v. West Pub. Co., 158 F.3d 693, 707 (C.A.2 1998) (“The Supreme Court applied [the Sony ] test to prevent copyright holders from leveraging the copyrights in their original work to control distribution of ... products that might be used incidentally for infringement, but that had substantial noninfringing uses .... The same rationale applies here [to

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The Ninth Circuit went astray, I will endeavor to explain, when that court granted summary judgment to Grokster and StreamCast on the charge of contributory liability based on distribution of their software products. Relying on its earlier opinion in A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (C.A.9 2001), the Court of Appeals held that “if substantial noninfringing use was shown, the copyright owner would be required to show that the defendant had reasonable knowledge of specific infringing files.” 380 F.3d 1154, 1161 (C.A.9 2004). “A careful examination of the record,” the court concluded, “indicates that there is no genuine issue of material fact as to noninfringing use.” Ibid. The appeals court pointed to the band Wilco, which made one of its albums available for free downloading, to other recording artists who may have authorized free distribution of their music through the Internet, and to public domain literary works and films available through Grokster's and StreamCast's software. Ibid. Although it acknowledged MGM's assertion that “the vast majority of the software use is for copyright infringement,” the court concluded that Grokster's and StreamCast's proffered evidence met Sony's requirement that “a product need only be capable of substantial noninfringing uses.”2

This case differs markedly from Sony. Cf. Peters, Brace Memorial Lecture: Copyright Enters the Public Domain, 51 J. Copyright Soc. 701, 724 (2004) (“The Grokster panel's reading of Sony is the broadest that any court has given it ....”). Here, there has been no finding of any fair use and little beyond anecdotal evidence of noninfringing uses. In finding the Grokster and StreamCast software products capable of substantial noninfringing uses, the District Court and the Court of Appeals appear to have relied largely on declarations submitted by the defendants. These declarations include assertions (some of them hearsay) that a number of copyright owners authorize distribution of their works on the Internet and that some public domain material is available through peer-to-peer networks including those accessed through Grokster's and StreamCast's software.

The District Court declared it “undisputed that there are substantial noninfringing uses for Defendants' software,” thus obviating the need for further proceedings. 259 F.Supp.2d, at 1035. This conclusion appears to rest almost entirely on the collection of declarations submitted by Grokster and StreamCast. Review of these declarations reveals mostly anecdotal evidence, sometimes obtained second-hand, of authorized copyrighted works or public domain works available online and shared through peer-to-peer networks, and general statements about the benefits of peer-to-peer technology. See, e.g., Decl. of Janis Ian ¶ 13, App. 128 (“P2P technologies offer musicians an alternative channel for promotion and distribution.”); Decl. of Gregory Newby ¶ 12, id., at 136 (“Numerous authorized

products] that have substantial, predominant and noninfringing uses as tools for research and citation.”). All Members of the Court agree, moreover, that “the Court of Appeals misapplied Sony,” at least to the extent it read that decision to limit “secondary liability” to a hardly-ever category, “quite beyond the circumstances to which the case applied.” 22Grokster and StreamCast, in the Court of Appeals' view, would be entitled to summary judgment unless MGM could show that that the software companies had knowledge of specific acts of infringement and failed to act on that knowledge-a standard the court held MGM could not meet.

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and public domain Project Gutenberg eBooks are made available on Morpheus, Kazaa, Gnutella, Grokster, and similar software products.”); Decl. of Aram Sinnreich ¶ 6, id., at 151 (“file sharing seems to have a net positive impact on music sales”); Decl. of John Busher ¶ 8, id., at 166 (“I estimate that Acoustica generates sales of between $1,000 and $10,000 per month as a result of the distribution of its trialware software through the Gnutella and FastTrack Networks.”); Decl. of Patricia D. Hoekman ¶¶ 3-4, id., at 169-170 (search on Morpheus for “President Bush speeches” found several video recordings, searches for “Declaration of Independence” and “Bible” found various documents and declarant was able to download a copy of the Declaration); Decl. of Sean L. Mayers ¶ 11, id., at 67 (“Existing open, decentralized peer-to-peer file-sharing networks ... offer content owners distinct business advantages over alternate online distribution technologies.”). Compare Decl. of Brewster Kahle ¶ 20, id., at 142 (“Those who download the Prelinger films ... are entitled to redistribute those files, and the Archive welcomes their redistribution by the Morpheus-Grokster-KaZaa community of users.”), with Deposition of Brewster Kahle, id., at 396-403 (Sept. 18, 2002) (testifying that he has no knowledge of any person downloading a Prelinger film using Morpheus, Grokster, or KaZaA). Compare also Decl. of Richard Prelinger ¶ 17, id., at 147 (“[W]e welcome further redistribution of the Prelinger films ... by individuals using peer-to-peer software products like Morpheus, KaZaA and Grokster.”), with Deposition of Richard Prelinger, id., at 410-411 (Oct. 1, 2002) (“Q. What is your understanding of Grokster? A. I have no understanding of Grokster .... Q. Do you know whether any user of the Grokster software has made available to share any Prelinger film? A. No.”). . . .These declarations do not support summary judgment in the face of evidence, proffered by MGM, of overwhelming use of Grokster's and StreamCast's software for infringement.3

Even if the absolute number of noninfringing files copied using the Grokster and StreamCast software is large, it does not follow that the products are therefore put to substantial noninfringing uses and are thus immune from liability. The number of noninfringing copies may be reflective of, and dwarfed by, the huge total volume of files shared. Further, the District Court and the Court of Appeals did not sharply distinguish between uses of Grokster's and StreamCast's software products

33Justice Breyer finds support for summary judgment in this motley collection of declarations and in a survey conducted by an expert retained by MGM. That survey identified 75% of the files available through Grokster as copyrighted works owned or controlled by the plaintiffs, and 15% of the files as works likely copyrighted. As to the remaining 10% of the files, “there was not enough information to form reasonable conclusions either as to what those files even consisted of, and/or whether they were infringing or non-infringing.” Even assuming, as Justice Breyer does, that the Sony Court would have absolved Sony of contributory liability solely on the basis of the use of the Betamax for authorized time-shifting, summary judgment is not inevitably appropriate here. Sony stressed that the plaintiffs there owned “well below 10%” of copyrighted television programming, and found, based on trial testimony from representatives of the four major sports leagues and other individuals authorized to consent to home-recording of their copyrighted broadcasts, that a similar percentage of program copying was authorized. Here, the plaintiffs allegedly control copyrights for 70% or 75% of the material exchanged through the Grokster and StreamCast software, and the District Court does not appear to have relied on comparable testimony about authorized copying from copyright holders.

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(which this case is about) and uses of peer-to-peer technology generally (which this case is not about).

In sum, when the record in this case was developed, there was evidence that Grokster's and StreamCast's products were, and had been for some time, overwhelmingly used to infringe, and that this infringement was the overwhelming source of revenue from the products. Fairly appraised, the evidence was insufficient to demonstrate, beyond genuine debate, a reasonable prospect that substantial or commercially significant noninfringing uses were likely to develop over time. On this record, the District Court should not have ruled dispositively on the contributory infringement charge by granting summary judgment to Grokster and StreamCast.4

If, on remand, the case is not resolved on summary judgment in favor of MGM based on Grokster and StreamCast actively inducing infringement, the Court of Appeals, I would emphasize, should reconsider, on a fuller record, its interpretation of Sony's product distribution holding.

Justice BREYER, with whom Justice STEVENS and Justice O'CONNOR join, concurring.

I agree with the Court that the distributor of a dual-use technology may be liable for the infringing activities of third parties where he or she actively seeks to advance the infringement. I further agree that, in light of our holding today, we need not now “revisit” Sony. . . Other Members of the Court, however, take up the Sony question: whether Grokster's product is “capable of ‘substantial’ or ‘commercially significant’ noninfringing uses.” And they answer that question by stating that the Court of Appeals was wrong when it granted summary judgment on the issue in Grokster's favor. I write to explain why I disagree with them on this matter.

I

. . . .

A

I begin with Sony's standard. In Sony, the Court considered the potential copyright liability of a company that did not itself illegally copy protected material, but rather sold a machine-a Video Cassette Recorder (VCR)-that could be used to do so. . . . Sony knew many customers would use its VCRs to engage in unauthorized copying and “ ‘library-building.’” But that fact, said the Court, was insufficient to make Sony itself an infringer. And the Court ultimately held that Sony was not liable for its customers' acts of infringement.

44The District Court's conclusion that “[p]laintiffs do not dispute that Defendants' software is being used, and could be used, for substantial noninfringing purposes,” is, to say the least, dubious. In the courts below and in this Court, MGM has continuously disputed any such conclusion. . . .

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[T]he Court wrote that the sale of copying equipment, “like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses.” The Court ultimately characterized the legal “question” in the particular case as “whether [Sony's VCR] is capable of commercially significant noninfringing uses ” (while declining to give “precise content” to these terms).

It then applied this standard. The Court had before it a survey (commissioned by the District Court and then prepared by the respondents) showing that roughly 9% of all VCR recordings were of the type—namely, religious, educational, and sports programming—owned by producers and distributors testifying on Sony's behalf who did not object to time-shifting. A much higher percentage of VCR users had at one point taped an authorized program, in addition to taping unauthorized programs. And the plaintiffs—not a large class of content providers as in this case—owned only a small percentage of the total available unauthorized programming. But of all the taping actually done by Sony's customers, only around 9% was of the sort the Court referred to as authorized.

The Court found that the magnitude of authorized programming was “significant,” and it also noted the “significant potential for future authorized copying.” The Court supported this conclusion by referencing the trial testimony of professional sports league officials and a religious broadcasting representative. It also discussed (1) a Los Angeles educational station affiliated with the Public Broadcasting Service that made many of its programs available for home taping, and (2) Mr. Rogers' Neighborhood, a widely watched children's program. On the basis of this testimony and other similar evidence, the Court determined that producers of this kind had authorized duplication of their copyrighted programs “in significant enough numbers to create a substantial market for a noninfringing use of the” VCR. Id., at 447, n. 28, 104 S.Ct. 774 (emphasis added).

The Court, in using the key word “substantial,” indicated that these circumstances alone constituted a sufficient basis for rejecting the imposition of secondary liability. See id., at 456 (“Sony demonstrated a significant likelihood that substantial numbers of copyright holders” would not object to time-shifting (emphasis added)). Nonetheless, the Court buttressed its conclusion by finding separately that, in any event, unauthorized timeshifting often constituted not infringement, but “fair use.” Id., at 447-456.

B

When measured against Sony's underlying evidence and analysis, the evidence now before us shows that Grokster passes Sony's test—that is, whether the company's product is capable of substantial or commercially significant noninfringing uses. For one thing, petitioners' (hereinafter MGM) own expert declared that 75% of current files available on Grokster are infringing and 15% are “likely infringing.” That leaves some number of files near 10% that apparently are noninfringing, a figure very similar to the 9% or so of authorized time-shifting uses of the VCR that the Court faced in Sony.

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As in Sony, witnesses here explained the nature of the noninfringing files on Grokster's network without detailed quantification. Those files include: [authorized copies of music by artists such as Wilco, Janis Ian, Pearl Jam, Dave Matthews, John Mayer, and others; free electronic books and other works from various online publishers, including Project Gutenberg; public domain and authorized software, such as WinZip 8.1; and licensed music videos and television and movie segments distributed via digital video packaging with the permission of the copyright holder.]

The nature of these and other lawfully swapped files is such that it is reasonable to infer quantities of current lawful use roughly approximate to those at issue in Sony. At least, MGM has offered no evidence sufficient to survive summary judgment that could plausibly demonstrate a significant quantitative difference. To be sure, in quantitative terms these uses account for only a small percentage of the total number of uses of Grokster's product. But the same was true in Sony, which characterized the relatively limited authorized copying market as “substantial.” (The Court made clear as well in Sony that the amount of material then presently available for lawful copying-if not actually copied-was significant, and the same is certainly true in this case.)

Importantly, Sony also used the word “capable,” asking whether the product is “capable of ”substantial noninfringing uses. Its language and analysis suggest that a figure like 10%, if fixed for all time, might well prove insufficient, but that such a figure serves as an adequate foundation where there is a reasonable prospect of expanded legitimate uses over time. See ibid. (noting a “significant potential for future authorized copying”). And its language also indicates the appropriateness of looking to potential future uses of the product to determine its “capability.”

Here the record reveals a significant future market for noninfringing uses of Grokster-type peer-to-peer software. Such software permits the exchange of any sort of digital file-whether that file does, or does not, contain copyrighted material. As more and more uncopyrighted information is stored in swappable form, it seems a likely inference that lawful peer-to-peer sharing will become increasingly prevalent. . . .

And that is just what is happening. Such legitimate noninfringing uses are coming to include the swapping of: research information (the initial purpose of many peer-to-peer networks); public domain films (e.g., those owned by the Prelinger Archive); historical recordings and digital educational materials (e.g., those stored on the Internet Archive); digital photos (OurPictures, for example, is starting a P2P photo-swapping service); “shareware” and “freeware” (e.g., Linux and certain Windows software); secure licensed music and movie files (Intent MediaWorks, for example, protects licensed content sent across P2P networks); news broadcasts past and present (the BBC Creative Archive lets users “rip, mix and share the BBC”); user-created audio and video files (including “podcasts” that may be distributed through P2P software); and all manner of free “open content” works collected by Creative Commons (one can search for Creative Commons material on StreamCast). I can find nothing in the record that suggests that this course of events will not continue to flow naturally as a consequence of the character of the software taken together with the foreseeable development of the

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Internet and of information technology. Cf. ante, at 2770 (opinion of the Court) (discussing the significant benefits of peer-to-peer technology).

There may be other now-unforeseen noninfringing uses that develop for peer-to-peer software, just as the home-video rental industry (unmentioned in Sony) developed for the VCR. But the foreseeable development of such uses, when taken together with an estimated 10% noninfringing material, is sufficient to meet Sony's standard. And while Sony considered the record following a trial, there are no facts asserted by MGM in its summary judgment filings that lead me to believe the outcome after a trial here could be any different. The lower courts reached the same conclusion.

Of course, Grokster itself may not want to develop these other noninfringing uses. But Sony's standard seeks to protect not the Groksters of this world (which in any event may well be liable under today's holding), but the development of technology more generally. And Grokster's desires in this respect are beside the point.

II

The real question here, I believe, is not whether the record evidence satisfies Sony. As I have interpreted the standard set forth in that case, it does. And of the Courts of Appeals that have considered the matter, only one has proposed interpreting Sony more strictly than I would do-in a case where the product might have failed under any standard. In re Aimster Copyright Litigation, 334 F.3d 643, 653 (C.A.7 2003) (defendant “failed to show that its service is ever used for any purpose other than to infringe” copyrights (emphasis added)); [cit].

Instead, the real question is whether we should modify the Sony standard, as MGM requests, or interpret Sony more strictly, as I believe Justice Ginsburg's approach would do in practice. Compare ante, at 2784-2787 (concurring) (insufficient evidence in this case of both present lawful uses and of a reasonable prospect that substantial noninfringing uses would develop over time), with Sony, 464 U.S., at 442-47 (basing conclusion as to the likely existence of a substantial market for authorized copying upon general declarations, some survey data, and common sense).

As I have said, Sony itself sought to “strike a balance between a copyright holder's legitimate demand for effective—not merely symbolic—protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce.” Id., at 442. Thus, to determine whether modification, or a strict interpretation, of Sony is needed, I would ask whether MGM has shown that Sony incorrectly balanced copyright and new-technology interests. In particular: (1) Has Sony (as I interpret it) worked to protect new technology? (2) If so, would modification or strict interpretation significantly weaken that protection? (3) If so, would new or necessary copyright-related benefits outweigh any such weakening?

A

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The first question is the easiest to answer. Sony's rule, as I interpret it, has provided entrepreneurs with needed assurance that they will be shielded from copyright liability as they bring valuable new technologies to market.

Sony's rule is clear. That clarity allows those who develop new products that are capable of substantial noninfringing uses to know, ex ante, that distribution of their product will not yield massive monetary liability. At the same time, it helps deter them from distributing products that have no other real function than-or that are specifically intended for-copyright infringement, deterrence that the Court's holding today reinforces (by adding a weapon to the copyright holder's legal arsenal).

Sony's rule is strongly technology protecting. The rule deliberately makes it difficult for courts to find secondary liability where new technology is at issue. It establishes that the law will not impose copyright liability upon the distributors of dual-use technologies (who do not themselves engage in unauthorized copying) unless the product in question will be used almost exclusively to infringe copyrights (or unless they actively induce infringements as we today describe). Sony thereby recognizes that the copyright laws are not intended to discourage or to control the emergence of new technologies, including (perhaps especially) those that help disseminate information and ideas more broadly or more efficiently. Thus Sony's rule shelters VCRs, typewriters, tape recorders, photocopiers, computers, cassette players, compact disc burners, digital video recorders, MP3 players, Internet search engines, and peer-to-peer software. But Sony's rule does not shelter descramblers, even if one could theoretically use a descrambler in a noninfringing way. . . .

Sony's rule is forward looking. It does not confine its scope to a static snapshot of a product's current uses (thereby threatening technologies that have undeveloped future markets). Rather, as the VCR example makes clear, a product's market can evolve dramatically over time. And Sony-by referring to a capacity for substantial noninfringing uses-recognizes that fact. Sony's word “capable” refers to a plausible, not simply a theoretical, likelihood that such uses will come to pass, and that fact anchors Sony in practical reality. Cf. Aimster, supra, at 651.

Sony's rule is mindful of the limitations facing judges where matters of technology are concerned. Judges have no specialized technical ability to answer questions about present or future technological feasibility or commercial viability where technology professionals, engineers, and venture capitalists themselves may radically disagree and where answers may differ depending upon whether one focuses upon the time of product development or the time of distribution. Consider, for example, the question whether devices can be added to Grokster's software that will filter out infringing files. MGM tells us this is easy enough to do, as do several amici that produce and sell the filtering technology. Grokster says it is not at all easy to do, and not an efficient solution in any event, and several apparently disinterested computer science professors agree. Which account should a judge credit? Sony says that the judge will not necessarily have to decide.Given the nature of the Sony rule, it is not surprising that in the last 20 years, there have been relatively few contributory infringement suits-based on a product distribution theory-brought against technology providers (a small handful of federal appellate court cases and perhaps fewer than two dozen District Court cases in the

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last 20 years). I have found nothing in the briefs or the record that shows that Sony has failed to achieve its innovation-protecting objective.

B

The second, more difficult, question is whether a modified Sony rule (or a strict interpretation) would significantly weaken the law's ability to protect new technology. Justice Ginsburg's approach would require defendants to produce considerably more concrete evidence-more than was presented here-to earn Sony's shelter. That heavier evidentiary demand, and especially the more dramatic (case-by-case balancing) modifications that MGM and the Government seek, would, I believe, undercut the protection that Sony now offers.

To require defendants to provide, for example, detailed evidence-say business plans, profitability estimates, projected technological modifications, and so forth-would doubtless make life easier for copyrightholder plaintiffs. But it would simultaneously increase the legal uncertainty that surrounds the creation or development of a new technology capable of being put to infringing uses. Inventors and entrepreneurs (in the garage, the dorm room, the corporate lab, or the boardroom) would have to fear (and in many cases endure) costly and extensive trials when they create, produce, or distribute the sort of information technology that can be used for copyright infringement. They would often be left guessing as to how a court, upon later review of the product and its uses, would decide when necessarily rough estimates amounted to sufficient evidence. They would have no way to predict how courts would weigh the respective values of infringing and noninfringing uses; determine the efficiency and advisability of technological changes; or assess a product's potential future markets. The price of a wrong guess-even if it involves a good-faith effort to assess technical and commercial viability-could be large statutory damages (not less than $750 and up to $30,000 per infringed work ). 17 U.S.C. § 504(c)(1). The additional risk and uncertainty would mean a consequent additional chill of technological development.

C

The third question-whether a positive copyright impact would outweigh any technology-related loss-I find the most difficult of the three. I do not doubt that a more intrusive Sony test would generally provide greater revenue security for copyright holders. But it is harder to conclude that the gains on the copyright swings would exceed the losses on the technology roundabouts.

For one thing, the law disfavors equating the two different kinds of gain and loss; rather, it leans in favor of protecting technology. As Sony itself makes clear, the producer of a technology which permits unlawful copying does not himself engage in unlawful copying-a fact that makes the attachment of copyright liability to the creation, production, or distribution of the technology an exceptional thing. See 464 U.S., at 431 (courts “must be circumspect” in construing the copyright laws to preclude distribution of new technologies). Moreover, Sony has been the law for some time. And that fact imposes a serious burden upon copyright holders like MGM to show a need for change in the current rules of the game, including a more strict interpretation of the test.

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In any event, the evidence now available does not, in my view, make out a sufficiently strong case for change. To say this is not to doubt the basic need to protect copyrighted material from infringement. . . . But these highly general principles cannot by themselves tell us how to balance the interests at issue in Sony or whether Sony's standard needs modification. And at certain key points, information is lacking.

Will an unmodified Sony lead to a significant diminution in the amount or quality of creative work produced? Since copyright's basic objective is creation and its revenue objectives but a means to that end, this is the underlying copyright question. And its answer is far from clear.Unauthorized copying likely diminishes industry revenue, though it is not clear by how much. . . . .

The extent to which related production has actually and resultingly declined remains uncertain, though there is good reason to believe that the decline, if any, is not substantial. . . .

More importantly, copyright holders at least potentially have other tools available to reduce piracy and to abate whatever threat it poses to creative production. As today's opinion makes clear, a copyright holder may proceed against a technology provider where a provable specific intent to infringe (of the kind the Court describes) is present. Services like Grokster may well be liable under an inducement theory.

In addition, a copyright holder has always had the legal authority to bring a traditional infringement suit against one who wrongfully copies. Indeed, since September 2003, the Recording Industry Association of America (RIAA) has filed “thousands of suits against people for sharing copyrighted material.” [cit]. These suits have provided copyright holders with damages; have served as a teaching tool, making clear that much file sharing, if done without permission, is unlawful; and apparently have had a real and significant deterrent effect. . . .

Further, copyright holders may develop new technological devices that will help curb unlawful infringement. Some new technology, called “digital ‘watermarking’ ” and “digital fingerprint[ing],” can encode within the file information about the author and the copyright scope and date, which “fingerprints” can help to expose infringers. . .

At the same time, advances in technology have discouraged unlawful copying by making lawful copying (e.g., downloading music with the copyright holder's permission) cheaper and easier to achieve. Several services now sell music for less than $1 per song. (Walmart.com, for example, charges $0.88 each). Consequently, many consumers initially attracted to the convenience and flexibility of services like Grokster are now migrating to lawful paid services (services with copying permission) where they can enjoy at little cost even greater convenience and flexibility without engaging in unlawful swapping. . . .

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Thus, lawful music downloading services-those that charge the customer for downloading music and pay royalties to the copyright holder-have continued to grow and to produce substantial revenue. . . .And more advanced types of non-music-oriented P2P networks have also started to develop, drawing in part on the lessons of Grokster.

Finally, as Sony recognized, the legislative option remains available. Courts are less well suited than Congress to the task of “accommodat[ing] fully the varied permutations of competing interests that are inevitably implicated by such new technology.” Sony, 464 U.S., at 431. . . .

I do not know whether these developments and similar alternatives will prove sufficient, but I am reasonably certain that, given their existence, a strong demonstrated need for modifying Sony (or for interpreting Sony's standard more strictly) has not yet been shown. That fact, along with the added risks that modification (or strict interpretation) would impose upon technological innovation, leads me to the conclusion that we should maintain Sony, reading its standard as I have read it. As so read, it requires affirmance of the Ninth Circuit's determination of the relevant aspects of the Sony question.

* * *

For these reasons, I disagree with Justice Ginsburg, but I agree with the Court and join its opinion.

The CARTOON NETWORK v. CSC HOLDINGS, INC.536 F.3d 121 (2008)

JOHN M. WALKER, JR., Circuit Judge:

Defendant-Appellant Cablevision Systems Corporation (“Cablevision”) wants to market a new “Remote Storage” Digital Video Recorder system (“RS-DVR”), using a technology akin to both traditional, set-top digital video recorders, like TiVo (“DVRs”), and the video-on-demand (“VOD”) services provided by many cable companies. Plaintiffs-Appellees produce copyrighted movies and television programs that they provide to Cablevision pursuant to numerous licensing agreements. They contend that Cablevision, through the operation of its RS-DVR system as proposed, would directly infringe their copyrights both by making unauthorized reproductions, and by engaging in public performances, of their copyrighted works. The material facts are not in dispute. Because we conclude that Cablevision would not directly infringe plaintiffs' rights under the Copyright Act by offering its RS-DVR system to consumers, we reverse the district court's award of summary judgment to plaintiffs, and we vacate its injunction against Cablevision.

BACKGROUND

Today's television viewers increasingly use digital video recorders (“DVRs”) instead of video cassette recorders (“VCRs”) to record television programs and play them back later at their convenience. DVRs generally store recorded programming on an internal hard drive rather than a cassette. But, as this case demonstrates, the

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generic term “DVR” actually refers to a growing number of different devices and systems. Companies like TiVo sell a stand-alone DVR device that is typically connected to a user's cable box and television much like a VCR. Many cable companies also lease to their subscribers “set-top storage DVRs,” which combine many of the functions of a standard cable box and a stand-alone DVR in a single device.

In March 2006, Cablevision, an operator of cable television systems, announced the advent of its new “Remote Storage DVR System.” As designed, the RS-DVR allows Cablevision customers who do not have a stand-alone DVR to record cable programming on central hard drives housed and maintained by Cablevision at a “remote” location. RS-DVR customers may then receive playback of those programs through their home television sets, using only a remote control and a standard cable box equipped with the RS-DVR software. Cablevision notified its content providers, including plaintiffs, of its plans to offer RS-DVR, but it did not seek any license from them to operate or sell the RS-DVR.

Plaintiffs, which hold the copyrights to numerous movies and television programs, sued Cablevision for declaratory and injunctive relief. They alleged that Cablevision's proposed operation of the RS-DVR would directly infringe their exclusive rights to both reproduce and publicly perform their copyrighted works. Critically for our analysis here, plaintiffs alleged theories only of direct infringement, not contributory infringement, and defendants waived any defense based on fair use.

Ultimately, the United States District Court for the Southern District of New York (Denny Chin, Judge), awarded summary judgment to the plaintiffs and enjoined Cablevision from operating the RS-DVR system without licenses from its content providers. See Twentieth Century Fox Film Corp. v. Cablevision Sys. Corp. (Cablevision I), 478 F.Supp.2d 607 (S.D.N.Y.2007). At the outset, we think it helpful to an understanding of our decision to describe, in greater detail, both the RS-DVR and the district court's opinion.

I. Operation of the RS-DVR System

Cable companies like Cablevision aggregate television programming from a wide variety of “content providers”-the various broadcast and cable channels that produce or provide individual programs-and transmit those programs into the homes of their subscribers via coaxial cable. At the outset of the transmission process, Cablevision gathers the content of the various television channels into a single stream of data. Generally, this stream is processed and transmitted to Cablevision's customers in real time. Thus, if a Cartoon Network program is scheduled to air Monday night at 8pm, Cartoon Network transmits that program's data to Cablevision and other cable companies nationwide at that time, and the cable companies immediately re-transmit the data to customers who subscribe to that channel.

Under the new RS-DVR, this single stream of data is split into two streams. The first is routed immediately to customers as before. The second stream flows into a device called the Broadband Media Router (“BMR”), id. at 613, which buffers the

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data stream, reformats it, and sends it to the “Arroyo Server,” which consists, in relevant part, of two data buffers and a number of high-capacity hard disks. The entire stream of data moves to the first buffer (the “primary ingest buffer”), at which point the server automatically inquires as to whether any customers want to record any of that programming. If a customer has requested a particular program, the data for that program move from the primary buffer into a secondary buffer, and then onto a portion of one of the hard disks allocated to that customer. As new data flow into the primary buffer, they overwrite a corresponding quantity of data already on the buffer. The primary ingest buffer holds no more than 0.1 seconds of each channel's programming at any moment. Thus, every tenth of a second, the data residing on this buffer are automatically erased and replaced. The *125 data buffer in the BMR holds no more than 1.2 seconds of programming at any time. While buffering occurs at other points in the operation of the RS-DVR, only the BMR buffer and the primary ingest buffer are utilized absent any request from an individual subscriber.

As the district court observed, “the RS-DVR is not a single piece of equipment,” but rather “a complex system requiring numerous computers, processes, networks of cables, and facilities staffed by personnel twenty-four hours a day and seven days a week.” Id. at 612. To the customer, however, the processes of recording and playback on the RS-DVR are similar to that of a standard set-top DVR. Using a remote control, the customer can record programming by selecting a program in advance from an on-screen guide, or by pressing the record button while viewing a given program. A customer cannot, however, record the earlier portion of a program once it has begun. To begin playback, the customer selects the show from an on-screen list of previously recorded programs. See id. at 614-16. The principal difference in operation is that, instead of sending signals from the remote to an on-set box, the viewer sends signals from the remote, through the cable, to the Arroyo Server at Cablevision's central facility. See id. In this respect, RS-DVR more closely resembles a VOD service, whereby a cable subscriber uses his remote and cable box to request transmission of content, such as a movie, stored on computers at the cable company's facility. Id. at 612. But unlike a VOD service, RS-DVR users can only play content that they previously requested to be recorded.

Cablevision has some control over the content available for recording: a customer can only record programs on the channels offered by Cablevision (assuming he subscribes to them). Cablevision can also modify the system to limit the number of channels available and considered doing so during development of the RS-DVR. Id. at 613.

II. The District Court's Decision

In the district court, plaintiffs successfully argued that Cablevision's proposed system would directly infringe their copyrights in three ways. First, by briefly storing data in the primary ingest buffer and other data buffers integral to the function of the RS-DVR, Cablevision would make copies of protected works and thereby directly infringe plaintiffs' exclusive right of reproduction under the Copyright Act. Second, by copying programs onto the Arroyo Server hard disks (the “playback copies”), Cablevision would again directly infringe the reproduction right. And third, by transmitting the data from the Arroyo Server hard disks to its RS-DVR customers in

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response to a “playback” request, Cablevision would directly infringe plaintiffs' exclusive right of public performance. See id. at 617. Agreeing with all three arguments, the district court awarded summary declaratory judgment to plaintiffs and enjoined Cablevision from operating the RS-DVR system without obtaining licenses from the plaintiff copyright holders.

As to the buffer data, the district court rejected defendants' arguments 1) that the data were not “fixed” and therefore were not “copies” as defined in the Copyright Act, and 2) that any buffer copying was de minimis because the buffers stored only small amounts of data for very short periods of time. In rejecting the latter argument, the district court noted that the “aggregate effect of the buffering” was to reproduce the entirety of Cablevision's programming, and such copying “can hardly be called de minimis.” Id. at 621.

On the issue of whether creation of the playback copies made Cablevision liable for direct infringement, the parties and the district court agreed that the dispositive question was “who makes the copies”? Id. at 617. Emphasizing Cablevision's “unfettered discretion” over the content available for recording, its ownership and maintenance of the RS-DVR components, and its “continuing relationship” with its RS-DVR customers, the district court concluded that “the copying of programming to the RS-DVR's Arroyo servers ... would be done not by the customer but by Cablevision, albeit at the customer's request.” Id. at 618, 620, 621.

Finally, as to the public performance right, Cablevision conceded that, during the playback, “the streaming of recorded programming in response to a customer's request is a performance.” Id. at 622. Cablevision contended, however, that the work was performed not by Cablevision, but by the customer, an argument the district court rejected “for the same reasons that [it] reject [ed] the argument that the customer is ‘doing’ the copying involved in the RS-DVR.” Id. Cablevision also argued that such a playback transmission was not “to the public,” and therefore not a public performance as defined in the Copyright Act, because it “emanates from a distinct copy of a program uniquely associated with one customer's set-top box and intended for that customer's exclusive viewing in his or her home.” Id. The district court disagreed, noting that “Cablevision would transmit the same program to members of the public, who may receive the performance at different times, depending on whether they view the program in real time or at a later time as an RS-DVR playback.” Id. at 623 (emphasis added). The district court also relied on a case from the Northern District of California, On Command Video Corp. v. Columbia Pictures Industries, 777 F.Supp. 787 (N.D.Cal.1991), which held that when the relationship between the transmitter and the audience of a performance is commercial, the transmission is “to the public,” see Cablevision I, 478 F.Supp.2d at 623 (citing On Command, 777 F.Supp. at 790).

Finding that the operation of the RS-DVR would infringe plaintiffs' copyrights, the district court awarded summary judgment to plaintiffs and enjoined Cablevision from copying or publicly performing plaintiffs' copyrighted works “in connection with its proposed RS-DVR system,” unless it obtained the necessary licenses. Cablevision I, 478 F.Supp.2d at 624. Cablevision appealed.

DISCUSSION

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We review a district court's grant of summary judgment de novo. Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605, 607 (2d Cir.2006).

“Section 106 of the Copyright Act grants copyright holders a bundle of exclusive rights....” Id. at 607-08. This case implicates two of those rights: the right “to reproduce the copyrighted work in copies,” and the right “to perform the copyrighted work publicly.” 17 U.S.C. § 106(1), (4). As discussed above, the district court found that Cablevision infringed the first right by 1) buffering the data from its programming stream and 2) copying content onto the Arroyo Server hard disks to enable playback of a program requested by an RS-DVR customer. In addition, the district court found that Cablevision would infringe the public performance right by transmitting a program to an RS-DVR customer in response to that customer's playback request. We address each of these three allegedly infringing acts in turn.

I. The Buffer Data

It is undisputed that Cablevision, not any customer or other entity, takes the content from one stream of programming, after the split, and stores it, one small piece at a time, in the BMR buffer and the primary ingest buffer. As a result, the information is buffered before any customer requests a recording, and would be buffered even if no such request were made. The question is whether, by buffering the data that make up a given work, Cablevision “reproduce[s]” that work “in copies,” 17 U.S.C. § 106(1), and thereby infringes the copyright holder's reproduction right.

[1] “Copies,” as defined in the Copyright Act, “are material objects ... in which a work is fixed by any method ... and from which the work can be ... reproduced.” Id. § 101. The Act also provides that a work is “ ‘fixed’ in a tangible medium of expression when its embodiment ... is sufficiently permanent or stable to permit it to be ... reproduced ... for a period of more than transitory duration.” Id. (emphasis added). We believe that this language plainly imposes two distinct but related requirements: the work must be embodied in a medium, i.e., placed in a medium such that it can be perceived, reproduced, etc., from that medium (the “embodiment requirement”), and it must remain thus embodied “for a period of more than transitory duration” (the “duration requirement”). See 2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 8.02[B][3], at 8-32 (2007). Unless both requirements are met, the work is not “fixed” in the buffer, and, as a result, the buffer data is not a “copy” of the original work whose data is buffered.

The district court mistakenly limited its analysis primarily to the embodiment requirement. As a result of this error, once it determined that the buffer data was “[c]learly ... capable of being reproduced,” i.e., that the work was embodied in the buffer, the district court concluded that the work was therefore “fixed” in the buffer, and that a copy had thus been made. Cablevision I, 478 F.Supp.2d at 621-22. In doing so, it relied on a line of cases beginning with MAI Systems Corp. v. Peak Computer Inc., 991 F.2d 511 (9th Cir.1993). It also relied on the United States Copyright Office's 2001 report on the Digital Millennium Copyright Act, which states, in essence, that an embodiment is fixed “[u]nless a reproduction manifests itself so fleetingly that it cannot be copied.” U.S. Copyright Office, DMCA Section 104 Report

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111 (Aug.2001) (“DMCA Report ”) (emphasis added), available at http:// www. copyright. gov/ reports/ studies/ dmca/ sec- 104- report- vol- 1. pdf.

The district court's reliance on cases like MAI Systems is misplaced. In general, those cases conclude that an alleged copy is fixed without addressing the duration requirement; it does not follow, however, that those cases assume, much less establish, that such a requirement does not exist. Indeed, the duration requirement, by itself, was not at issue in MAI Systems and its progeny. As a result, they do not speak to the issues squarely before us here: If a work is only “embodied” in a medium for a period of transitory duration, can it be “fixed” in that medium, and thus a copy? And what constitutes a period “of more than transitory duration”?

In MAI Systems, defendant Peak Computer, Inc., performed maintenance and repairs on computers made and sold by MAI Systems. In order to service a customer's computer, a Peak employee had to operate the computer and run the computer's copyrighted operating system software. See MAI Sys., 991 F.2d at 513. The issue in MAI Systems was whether, by loading the software into the computer's RAM,FN1 the repairman created a “copy” as defined in § 101. See id. at 517. The resolution of this issue turned on whether the software's embodiment in the computer's RAM was “fixed,” within the meaning of the same section. The Ninth Circuit concluded that

FN1. To run a computer program, the data representing that program must be transferred from a data storage medium (such as a floppy disk or a hard drive) to a form of Random Access Memory (“RAM”) where the data can be processed. The data buffers at issue here are also a form of RAM.

by showing that Peak loads the software into the RAM and is then able to view the system error log and diagnose the problem with the computer, MAI has adequately shown that the representation created in the RAM is “sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.”

Id. at 518 (quoting 17 U.S.C. § 101).

The MAI Systems court referenced the “transitory duration” language but did not discuss or analyze it. The opinion notes that the defendants “vigorously” argued that the program's embodiment in the RAM was not a copy, but it does not specify the arguments defendants made. Id. at 517. This omission suggests that the parties did not litigate the significance of the “transitory duration” language, and the court therefore had no occasion to address it. This is unsurprising, because it seems fair to assume that in these cases the program was embodied in the RAM for at least several minutes.

Accordingly, we construe MAI Systems and its progeny as holding that loading a program into a computer's RAM can result in copying that program. We do not read MAI Systems as holding that, as a matter of law, loading a program into a form of RAM always results in copying. Such a holding would read the “transitory duration” language out of the definition, and we do not believe our sister circuit would dismiss this statutory language without even discussing it. It appears the parties in MAI Systems simply did not dispute that the duration requirement was satisfied; this line

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of cases simply concludes that when a program is loaded into RAM, the embodiment requirement is satisfied-an important holding in itself, and one we see no reason to quibble with here.

At least one court, relying on MAI Systems in a highly similar factual setting, has made this point explicitly. In Advanced Computer Services of Michigan, Inc. v. MAI Systems Corp., the district court expressly noted that the unlicensed user in that case ran copyrighted diagnostic software “for minutes or longer,” but that the program's embodiment in the computer's RAM might be too ephemeral to be fixed if the computer had been shut down “within seconds or fractions of a second” after loading the copyrighted program. 845 F.Supp. 356, 363 (E.D.Va.1994). We have no quarrel with this reasoning; it merely makes explicit the reasoning that is implicit in the other MAI Systems cases. Accordingly, those cases provide no support for the conclusion that the definition of “fixed” does not include a duration requirement. See Webster v. Fall, 266 U.S. 507, 511, 45 S.Ct. 148, 69 L.Ed. 411 (1924) (“Questions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents.”).

Nor does the Copyright Office's 2001 DMCA Report, also relied on by the district court in this case, explicitly suggest that the definition of “fixed” does not contain a duration requirement. However, as noted above, it does suggest that an embodiment is fixed “[u]nless a reproduction manifests itself so fleetingly that it cannot be copied, perceived or communicated.” DMCA Report, supra, at 111. As we have stated, to determine whether a work is “fixed” in a given medium, the statutory language directs us to ask not only 1) whether a work is “embodied” in that medium, but also 2) whether it is embodied in the medium “for a period of more than transitory duration.” According to the Copyright Office, if the work is capable of being copied from that medium for any amount of time, the answer to both questions is “yes.” The problem with this interpretation is that it reads the “transitory duration” language out of the statute.

We assume, as the parties do, that the Copyright Office's pronouncement deserves only Skidmore deference, deference based on its “power to persuade.” Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944). And because the Office's interpretation does not explain why Congress would include language in a definition if it intended courts to ignore that language, we are not persuaded.

In sum, no case law or other authority dissuades us from concluding that the definition of “fixed” imposes both an embodiment requirement and a duration requirement. Accord CoStar Group Inc. v. LoopNet, Inc., 373 F.3d 544, 551 (4th Cir.2004) (while temporary reproductions “may be made in this transmission process, they would appear not to be ‘fixed’ in the sense that they are ‘of more than transitory duration’ ”). We now turn to whether, in this case, those requirements are met by the buffer data.

Cablevision does not seriously dispute that copyrighted works are “embodied” in the buffer. Data in the BMR buffer can be reformatted and transmitted to the other components of the RS-DVR system. Data in the primary ingest buffer can be copied onto the Arroyo hard disks if a user has requested a recording of that data. Thus, a

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work's “embodiment” in either buffer “is sufficiently permanent or stable to permit it to be perceived, reproduced,” (as in the case of the ingest buffer) “or otherwise communicated” (as in the BMR buffer). 17 U.S.C. § 101. The result might be different if only a single second of a much longer work was placed in the buffer in isolation. In such a situation, it might be reasonable to conclude that only a minuscule portion of a work, rather than “a work” was embodied in the buffer. Here, however, where every second of an entire work is placed, one second at a time, in the buffer, we conclude that the work is embodied in the buffer.

Does any such embodiment last “for a period of more than transitory duration”? Id. No bit of data remains in any buffer for more than a fleeting 1.2 seconds. And unlike the data in cases like MAI Systems, which remained embodied in the computer's RAM memory until the user turned the computer off, each bit of data here is rapidly and automatically overwritten as soon as it is processed. While our inquiry is necessarily fact-specific, and other factors not present here may alter the duration analysis significantly, these facts strongly suggest that the works in this case are embodied in the buffer for only a “transitory” period, thus failing the duration requirement.

Against this evidence, plaintiffs argue only that the duration is not transitory because the data persist “long enough for Cablevision to make reproductions from them.” Br. of Pls.-Appellees the Cartoon Network et al. at 51. As we have explained above, however, this reasoning impermissibly reads the duration language out of the statute, and we reject it. Given that the data reside in no buffer for more than 1.2 seconds before being automatically overwritten, and in the absence of compelling arguments to the contrary, we believe that the copyrighted works here are not “embodied” in the buffers for a period of more than transitory duration, and are therefore not “fixed” in the buffers. Accordingly, the acts of buffering in the operation of the RS-DVR do not create copies, as the Copyright Act defines that term. Our resolution of this issue renders it unnecessary for us to determine whether any copies produced by buffering data would be de minimis, and we express no opinion on that question.

II. Direct Liability for Creating the Playback Copies

In most copyright disputes, the allegedly infringing act and the identity of the infringer are never in doubt. These cases turn on whether the conduct in question does, in fact, infringe the plaintiff's copyright. In this case, however, the core of the dispute is over the authorship of the infringing conduct. After an RS-DVR subscriber selects a program to record, and that program airs, a copy of the program-a copyrighted work-resides on the hard disks of Cablevision's Arroyo Server, its creation unauthorized by the copyright holder. The question is who made this copy. If it is Cablevision, plaintiffs' theory of direct infringement succeeds; if it is the customer, plaintiffs' theory fails because Cablevision would then face, at most, secondary liability, a theory of liability expressly disavowed by plaintiffs.

Few cases examine the line between direct and contributory liability. Both parties cite a line of cases beginning with Religious Technology Center v. Netcom On-Line Communication Services, 907 F.Supp. 1361 (N.D.Cal.1995). In Netcom, a third-party customer of the defendant Internet service provider (“ISP”) posted a copyrighted

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work that was automatically reproduced by the defendant's computer. The district court refused to impose direct liability on the ISP, reasoning that “[a]lthough copyright is a strict liability statute, there should still be some element of volition or causation which is lacking where a defendant's system is merely used to create a copy by a third party.” Id. at 1370. Recently, the Fourth Circuit endorsed the Netcom decision, noting that

to establish direct liability under ... the Act, something more must be shown than mere ownership of a machine used by others to make illegal copies. There must be actual infringing conduct with a nexus sufficiently close and causal to the illegal copying that one could conclude that the machine owner himself trespassed on the exclusive domain of the copyright owner.”

CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544, 550 (4th Cir.2004).

Here, the district court pigeon-holed the conclusions reached in Netcom and its progeny as “premised on the unique attributes of the Internet.” Cablevision I, 478 F.Supp.2d at 620. While the Netcom court was plainly concerned with a theory of direct liability that would effectively “hold the entire Internet liable” for the conduct of a single user, 907 F.Supp. at 1372, its reasoning and conclusions, consistent with precedents of this court and the Supreme Court, and with the text of the Copyright Act, transcend the Internet. Like the Fourth Circuit, we reject the contention that “the Netcom decision was driven by expedience and that its holding is inconsistent with the established law of copyright,” CoStar, 373 F.3d at 549, and we find it “a particularly rational interpretation of § 106,” id. at 551, rather than a special-purpose rule applicable only to ISPs.

When there is a dispute as to the author of an allegedly infringing instance of reproduction, Netcom and its progeny direct our attention to the volitional conduct that causes the copy to be made. There are only two instances of volitional conduct in this case: Cablevision's conduct in designing, housing, and maintaining a system that exists only to produce a copy, and a customer's conduct in ordering that system to produce a copy of a specific program. In the case of a VCR, it seems clear-and we know of no case holding otherwise-that the operator of the VCR, the person who actually presses the button to make the recording, supplies the necessary element of volition, not the person who manufactures, maintains, or, if distinct from the operator, owns the machine. We do not believe that an RS-DVR customer is sufficiently distinguishable from a VCR user to impose liability as a direct infringer on a different party for copies that are made automatically upon that customer's command.

The district court emphasized the fact that copying is “instrumental” rather than “incidental” to the function of the RS-DVR system. Cablevision I, 478 F.Supp.2d at 620. While that may distinguish the RS-DVR from the ISPs in Netcom and CoStar, it does not distinguish the RS-DVR from a VCR, a photocopier, or even a typical copy shop. And the parties do not seem to contest that a company that merely makes photocopiers available to the public on its premises, without more, is not subject to liability for direct infringement for reproductions made by customers using those copiers. They only dispute whether Cablevision is similarly situated to such a proprietor.

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The district court found Cablevision analogous to a copy shop that makes course packs for college professors. In the leading case involving such a shop, for example, “[t]he professor [gave] the copyshop the materials of which the coursepack [was] to be made up, and the copyshop [did] the rest.” Princeton Univ. Press v. Mich. Document Servs., 99 F.3d 1381, 1384 (6th Cir.1996) (en banc). There did not appear to be any serious dispute in that case that the shop itself was directly liable for reproducing copyrighted works. The district court here found that Cablevision, like this copy shop, would be “doing” the copying, albeit “at the customer's behest.” Cablevision I, 478 F.Supp.2d at 620.

But because volitional conduct is an important element of direct liability, the district court's analogy is flawed. In determining who actually “makes” a copy, a significant difference exists between making a request to a human employee, who then volitionally operates the copying system to make the copy, and issuing a command directly to a system, which automatically obeys commands and engages in no volitional conduct. In cases like Princeton University Press, the defendants operated a copying device and sold the product they made using that device. See 99 F.3d at 1383 (“The corporate defendant ... is a commercial copyshop that reproduced substantial segments of copyrighted works of scholarship, bound the copies into ‘coursepacks,’ and sold the coursepacks to students....”). Here, by selling access to a system that automatically produces copies on command, Cablevision more closely resembles a store proprietor who charges customers to use a photocopier on his premises, and it seems incorrect to say, without more, that such a proprietor “makes” any copies when his machines are actually operated by his customers. See Netcom, 907 F.Supp. at 1369. Some courts have held to the contrary, but they do not explicitly explain why, and we find them unpersuasive. See, e.g., Elektra Records Co. v. Gem Elec. Distribs., Inc., 360 F.Supp. 821, 823 (E.D.N.Y.1973) (concluding that, “regardless” of whether customers or defendants' employees operated the tape-copying machines at defendants' stores, defendant had actively infringed copyrights).

The district court also emphasized Cablevision's “unfettered discretion in selecting the programming that it would make available for recording.” Cablevision I, 478 F.Supp.2d at 620. This conduct is indeed more proximate to the creation of illegal copying than, say, operating an ISP or opening a copy shop, where all copied content was supplied by the customers themselves or other third parties. Nonetheless, we do not think it sufficiently proximate to the copying to displace the customer as the person who “makes” the copies when determining liability under the Copyright Act. Cablevision, we note, also has subscribers who use home VCRs or DVRs (like TiVo), and has significant control over the content recorded by these customers. But this control is limited to the channels of programming available to a customer and not to the programs themselves. Cablevision has no control over what programs are made available on individual channels or when those programs will air, if at all. In this respect, Cablevision possesses far less control over recordable content than it does in the VOD context, where it actively selects and makes available beforehand the individual programs available for viewing. For these reasons, we are not inclined to say that Cablevision, rather than the user, “does” the copying produced by the RS-DVR system. As a result, we find that the district court erred in concluding that Cablevision, rather than its RS-DVR customers, makes

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the copies carried out by the RS-DVR system.

Our refusal to find Cablevision directly liable on these facts is buttressed by the existence and contours of the Supreme Court's doctrine of contributory liability in the copyright context. After all, the purpose of any causation-based liability doctrine is to identify the actor (or actors) whose “conduct has been so significant and important a cause that [he or she] should be legally responsible.” W. Page Keeton et al., Prosser and Keeton on Torts § 42, at 273 (5th ed.1984). But here, to the extent that we may construe the boundaries of direct liability more narrowly, the doctrine of contributory liability stands ready to provide adequate protection to copyrighted works.

Most of the facts found dispositive by the district court-e.g., Cablevision's “continuing relationship” with its RS-DVR customers, its control over recordable content, and the “instrumental[ity]” of copying to the RS-DVR system, Cablevision I, 478 F.Supp.2d at 618-20-seem to us more relevant to the question of contributory liability. In Sony Corp. of America v. Universal City Studios, Inc., the lack of an “ongoing relationship” between Sony and its VCR customers supported the Court's conclusion that it should not impose contributory liability on Sony for any infringing copying done by Sony VCR owners. 464 U.S. 417, 437-38, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984). The Sony Court did deem it “just” to impose liability on a party in a “position to control” the infringing uses of another, but as a contributory, not direct, infringer. Id. at 437, 104 S.Ct. 774. And asking whether copying copyrighted material is only “incidental” to a given technology is akin to asking whether that technology has “commercially significant noninfringing uses,” another inquiry the Sony Court found relevant to whether imposing contributory liability was just. Id. at 442, 104 S.Ct. 774.

The Supreme Court's desire to maintain a meaningful distinction between direct and contributory copyright infringement is consistent with congressional intent. The Patent Act, unlike the Copyright Act, expressly provides that someone who “actively induces infringement of a patent” is “liable as an infringer,” 35 U.S.C. § 271(b), just like someone who commits the underlying infringing act by “us[ing]” a patented invention without authorization, id. § 271(a). In contrast, someone who merely “sells ... a material or apparatus for use in practicing a patented process” faces only liability as a “contributory infringer.” Id. § 271(c). If Congress had meant to assign direct liability to both the person who actually commits a copyright-infringing act and any person who actively induces that infringement, the Patent Act tells us that it knew how to draft a statute that would have this effect. Because Congress did not do so, the Sony Court concluded that “[t]he Copyright Act does not expressly render anyone liable for infringement committed by another.” 464 U.S. at 434, 104 S.Ct. 774. Furthermore, in cases like Sony, the Supreme Court has strongly signaled its intent to use the doctrine of contributory infringement, not direct infringement, to “identify[ ] the circumstances in which it is just to hold one individual accountable for the actions of another.” Id. at 435, 104 S.Ct. 774. Thus, although Sony warns us that “the lines between direct infringement, contributory infringement, and vicarious liability are not clearly drawn,” id. at 435 n. 17, 104 S.Ct. 774 (internal quotation marks and citation omitted), that decision does not absolve us of our duty to discern where that line falls in cases, like this one, that require us to decide the question.

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The district court apparently concluded that Cablevision's operation of the RS-DVR system would contribute in such a major way to the copying done by another that it made sense to say that Cablevision was a direct infringer, and thus, in effect, was “doing” the relevant copying. There are certainly other cases, not binding on us, that follow this approach. See, e.g., Playboy Enters. v. Russ Hardenburgh, Inc., 982 F.Supp. 503, 513 (N.D.Ohio 1997) (noting that defendant ISP's encouragement of its users to copy protected files was “crucial” to finding that it was a direct infringer). We need not decide today whether one's contribution to the creation of an infringing copy may be so great that it warrants holding that party directly liable for the infringement, even though another party has actually made the copy. We conclude only that on the facts of this case, copies produced by the RS-DVR system are “made” by the RS-DVR customer, and Cablevision's contribution to this reproduction by providing the system does not warrant the imposition of direct liability. Therefore, Cablevision is entitled to summary judgment on this point, and the district court erred in awarding summary judgment to plaintiffs.

III. Transmission of RS-DVR Playback

Plaintiffs' final theory is that Cablevision will violate the Copyright Act by engaging in unauthorized public performances of their works through the playback of the RS-DVR copies. The Act grants a copyright owner the exclusive right, “in the case of ... motion pictures and other audiovisual works, to perform the copyrighted work publicly.” 17 U.S.C. § 106(4). Section 101, the definitional section of the Act, explains that

[t]o perform or display a work “publicly” means (1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

Id. § 101.

The parties agree that this case does not implicate clause (1). Accordingly, we ask whether these facts satisfy the second, “transmit clause” of the public performance definition: Does Cablevision “transmit ... a performance ... of the work ... to the public”? Id. No one disputes that the RS-DVR playback results in the transmission of a performance of a work-the transmission from the Arroyo Server to the customer's television set. Cablevision contends that (1) the RS-DVR customer, rather than Cablevision, does the transmitting and thus the performing and (2) the transmission is not “to the public” under the transmit clause.

As to Cablevision's first argument, we note that our conclusion in Part II that the customer, not Cablevision, “does” the copying does not dictate a parallel conclusion that the customer, and not Cablevision, “performs” the copyrighted work. The definitions that delineate the contours of the reproduction and public performance

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rights vary in significant ways. For example, the statute defines the verb “perform” and the noun “copies,” but not the verbs “reproduce” or “copy.” Id. We need not address Cablevision's first argument further because, even if we assume that Cablevision makes the transmission when an RS-DVR playback occurs, we find that the RS-DVR playback, as described here, does not involve the transmission of a performance “to the public.”

The statute itself does not expressly define the term “performance” or the phrase “to the public.” It does explain that a transmission may be “to the public ... whether the members of the public capable of receiving the performance ... receive it in the same place or in separate places and at the same time or at different times.” Id. This plain language instructs us that, in determining whether a transmission is “to the public,” it is of no moment that the potential recipients of the transmission are in different places, or that they may receive the transmission at different times. The implication from this same language, however, is that it is relevant, in determining whether a transmission is made to the public, to discern who is “capable of receiving” the performance being transmitted. The fact that the statute says “capable of receiving the performance,” instead of “capable of receiving the transmission,” underscores the fact that a transmission of a performance is itself a performance. Cf. Buck v. Jewell-La Salle Realty Co., 283 U.S. 191, 197-98, 51 S.Ct. 410, 75 L.Ed. 971 (1931).

The legislative history of the transmit clause supports this interpretation. The House Report on the 1976 Copyright Act states that

[u]nder the bill, as under the present law, a performance made available by transmission to the public at large is “public” even though the recipients are not gathered in a single place, and even if there is no proof that any of the potential recipients was operating his receiving apparatus at the time of the transmission. The same principles apply whenever the potential recipients of the transmission represent a limited segment of the public, such as the occupants of hotel rooms or the subscribers of a cable television service.

H.R.Rep. No. 94-1476, at 64-65 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5678 (emphases added).

Plaintiffs also reference a 1967 House Report, issued nearly a decade before the Act we are interpreting, stating that the same principles apply where the transmission is “capable of reaching different recipients at different times, as in the case of sounds or images stored in an information system and capable of being performed or displayed at the initiative of individual members of the public.” H.R.Rep. No. 90-83, at 29 (1967) (emphases added). We question how much deference this report deserves. But we need not belabor the point here, as the 1967 report is consistent with both legislative history contemporaneous with the Act's passage and our own interpretation of the statute's plain meaning.

From the foregoing, it is evident that the transmit clause directs us to examine who precisely is “capable of receiving” a particular transmission of a performance. Cablevision argues that, because each RS-DVR transmission is made using a single unique copy of a work, made by an individual subscriber, one that can be decoded

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exclusively by that subscriber's cable box, only one subscriber is capable of receiving any given RS-DVR transmission. This argument accords with the language of the transmit clause, which, as described above, directs us to consider the potential audience of a given transmission. We are unpersuaded by the district court's reasoning and the plaintiffs' arguments that we should consider a larger potential audience in determining whether a transmission is “to the public.”

The district court, in deciding whether the RS-DVR playback of a program to a particular customer is “to the public,” apparently considered all of Cablevision's customers who subscribe to the channel airing that program and all of Cablevision's RS-DVR subscribers who request a copy of that program. Thus, it concluded that the RS-DVR playbacks constituted public performances because “Cablevision would transmit the same program to members of the public, who may receive the performance at different times, depending on whether they view the program in real time or at a later time as an RS-DVR playback.” Cablevision I, 478 F.Supp.2d at 623 (emphasis added). In essence, the district court suggested that, in considering whether a transmission is “to the public,” we consider not the potential audience of a particular transmission, but the potential audience of the underlying work (i.e., “the program”) whose content is being transmitted.

We cannot reconcile the district court's approach with the language of the transmit clause. That clause speaks of people capable of receiving a particular “transmission” or “performance,” and not of the potential audience of a particular “work.” Indeed, such an approach would render the “to the public” language surplusage. Doubtless the potential audience for every copyrighted audiovisual work is the general public. As a result, any transmission of the content of a copyrighted work would constitute a public performance under the district court's interpretation. But the transmit clause obviously contemplates the existence of non-public transmissions; if it did not, Congress would have stopped drafting that clause after “performance.”

On appeal, plaintiffs offer a slight variation of this interpretation. They argue that both in its real-time cablecast and via the RS-DVR playback, Cablevision is in fact transmitting the “same performance” of a given work: the performance of the work that occurs when the programming service supplying Cablevision's content transmits that content to Cablevision and the service's other licensees. See Br. of Pls.-Appellees Twentieth Century Fox Film Corp. et al. at 27 (“Fox Br.”) (“The critical factor ... is that the same performance is transmitted to different subscribers at different times .... more specifically, the performance of that program by HBO or another programming service.” (third emphasis added)).

Thus, according to plaintiffs, when Congress says that to perform a work publicly means to transmit ... a performance ... to the public, they really meant “transmit ... the ‘original performance’ ... to the public.” The implication of this theory is that to determine whether a given transmission of a performance is “to the public,” we would consider not only the potential audience of that transmission, but also the potential audience of any transmission of the same underlying “original” performance.

Like the district court's interpretation, this view obviates any possibility of a purely

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private transmission. Furthermore, it makes Cablevision's liability depend, in part, on the actions of legal strangers. Assume that HBO transmits a copyrighted work to both Cablevision and Comcast. Cablevision merely retransmits the work from one Cablevision facility to another, while Comcast retransmits the program to its subscribers. Under plaintiffs' interpretation, Cablevision would still be transmitting the performance to the public, solely because Comcast has transmitted the same underlying performance to the public. Similarly, a hapless customer who records a program in his den and later transmits the recording to a television in his bedroom would be liable for publicly performing the work simply because some other party had once transmitted the same underlying performance to the public.

We do not believe Congress intended such odd results. Although the transmit clause is not a model of clarity, we believe that when Congress speaks of transmitting a performance to the public, it refers to the performance created by the act of transmission. Thus, HBO transmits its own performance of a work when it transmits to Cablevision, and Cablevision transmits its own performance of the same work when it retransmits the feed from HBO.

Furthermore, we believe it would be inconsistent with our own transmit clause jurisprudence to consider the potential audience of an upstream transmission by a third party when determining whether a defendant's own subsequent transmission of a performance is “to the public.” In National Football League v. PrimeTime 24 Joint Venture (NFL), 211 F.3d 10 (2000), we examined the transmit clause in the context of satellite television provider PrimeTime, which captured protected content in the United States from the NFL, transmitted it from the United States to a satellite (“the uplink”), and then transmitted it from the satellite to subscribers in both the United States and Canada (“the downlink”). PrimeTime had a license to transmit to its U.S. customers, but not its Canadian customers. It argued that although the downlink transmission to its Canadian subscribers was a public performance, it could not be held liable for that act because it occurred entirely outside of the United States and therefore was not subject to the strictures of the Copyright Act. It also argued that the uplink transmission was not a public performance because it was a transmission to a single satellite. See id. at 12.

The NFL court did not question the first assumption, but it flatly rejected the second on a specific and germane ground:

We believe the most logical interpretation of the Copyright Act is to hold that a public performance or display includes each step in the process by which a protected work wends its way to its audience. Under that analysis, it is clear that PrimeTime's uplink transmission of signals captured in the United States is a step in the process by which NFL's protected work wends its way to a public audience.

Id. at 13 (emphasis added) (internal quotation and citation omitted). Thus, while the uplink transmission that took place in the United States was not, in itself, “to the public,” the NFL court deemed it so because it ultimately resulted in an undisputed public performance. Notably, the NFL court did not base its decision on the fact that an upstream transmission by another party (the NFL) might have been to the public. Nor did the court base its decision on the fact that Primetime simultaneously transmitted a performance of the work to the public in the United States. Because

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NFL directs us to look downstream, rather than upstream or laterally, to determine whether any link in a chain of transmissions made by a party constitutes a public performance, we reject plaintiffs' contention that we examine the potential recipients of the content provider's initial transmission to determine who is capable of receiving the RS-DVR playback transmission.

Plaintiffs also rely on NFL for the proposition that Cablevision publicly performs a work when it splits its programming stream and transmits the second stream to the RS-DVR system. Because NFL only supports that conclusion if we determine that the final transmission in the chain (i.e., the RS-DVR playback transmission) is “to the public,” plaintiffs' reliance on NFL is misplaced. NFL dealt with a chain of transmissions whose final link was undisputedly a public performance. It therefore does not guide our current inquiry.

In sum, none of the arguments advanced by plaintiffs or the district court alters our conclusion that, under the transmit clause, we must examine the potential audience of a given transmission by an alleged infringer to determine whether that transmission is “to the public.” And because the RS-DVR system, as designed, only makes transmissions to one subscriber using a copy made by that subscriber, we believe that the universe of people capable of receiving an RS-DVR transmission is the single subscriber whose self-made copy is used to create that transmission.

Plaintiffs contend that it is “wholly irrelevant, in determining the existence of a public performance, whether ‘unique’ copies of the same work are used to make the transmissions.” Fox Br. at 27. But plaintiffs cite no authority for this contention. And our analysis of the transmit clause suggests that, in general, any factor that limits the potential audience of a transmission is relevant.

Furthermore, no transmission of an audiovisual work can be made, we assume, without using a copy of that work: to transmit a performance of a movie, for example, the transmitter generally must obtain a copy of that movie. As a result, in the context of movies, television programs, and other audiovisual works, the right of reproduction can reinforce and protect the right of public performance. If the owner of a copyright believes he is injured by a particular transmission of a performance of his work, he may be able to seek redress not only for the infringing transmission, but also for the underlying copying that facilitated the transmission. Given this interplay between the various rights in this context, it seems quite consistent with the Act to treat a transmission made using Copy A as distinct from one made using Copy B, just as we would treat a transmission made by Cablevision as distinct from an otherwise identical transmission made by Comcast. Both factors-the identity of the transmitter and the source material of the transmission-limit the potential audience of a transmission in this case and are therefore germane in determining whether that transmission is made “to the public.”

Indeed, we believe that Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749 F.2d 154 (3d Cir.1984), relied on by both plaintiffs and the district court, supports our decision to accord significance to the existence and use of distinct copies in our transmit clause analysis. In that case, defendant operated a video rental store, Maxwell's, which also housed a number of small private booths containing seats and a television. Patrons would select a film, enter the booth, and close the door. An

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employee would then load a copy of the requested movie into a bank of VCRs at the front of the store and push play, thereby transmitting the content of the tape to the television in the viewing booth. See id. at 156-57.

The Third Circuit found that defendants' conduct constituted a public performance under both clauses of the statutory definition. In concluding that Maxwell's violated the transmit clause, that court explicitly relied on the fact that defendants showed the same copy of a work seriatim to its clientele, and it quoted a treatise emphasizing the same fact:

Professor Nimmer's examination of this definition is particularly pertinent: “if the same copy ... of a given work is repeatedly played (i.e., ‘performed’) by different members of the public, albeit at different times, this constitutes a ‘public’ performance.” 2 M. Nimmer, § 8.14[C][3], at 8-142 (emphasis in original).... Although Maxwell's has only one copy of each film, it shows each copy repeatedly to different members of the public. This constitutes a public performance.

Id. at 159 (first omission in original).

Unfortunately, neither the Redd Horne court nor Prof. Nimmer explicitly explains why the use of a distinct copy affects the transmit clause inquiry. But our independent analysis confirms the soundness of their intuition: the use of a unique copy may limit the potential audience of a transmission and is therefore relevant to whether that transmission is made “to the public.” Plaintiffs' unsupported arguments to the contrary are unavailing.

Given that each RS-DVR transmission is made to a given subscriber using a copy made by that subscriber, we conclude that such a transmission is not “to the public,” without analyzing the contours of that phrase in great detail. No authority cited by the parties or the district court persuades us to the contrary.

In addition to Redd Horne, the district court also cited and analyzed On Command Video Corp. v. Columbia Pictures Industries, 777 F.Supp. 787 (N.D.Cal.1991), in its transmit clause analysis. In that case, defendant On Command developed*139 and sold “a system for the electronic delivery of movie video tapes,” which it sold to hotels. Id. at 788. The hub of the system was a bank of video cassette players, each containing a copy of a particular movie. From his room, a hotel guest could select a movie via remote control from a list on his television. The corresponding cassette player would start, and its output would be transmitted to that guest's room. During this playback, the movie selected was unavailable to other guests. See id. The court concluded that the transmissions made by this system were made to the public “because the relationship between the transmitter of the performance, On Command, and the audience, hotel guests, is a commercial, ‘public’ one regardless of where the viewing takes place.” Id. at 790.

Thus, according to the On Command court, any commercial transmission is a transmission “to the public.” We find this interpretation untenable, as it completely rewrites the language of the statutory definition. If Congress had wished to make all commercial transmissions public performances, the transmit clause would read: “to perform a work publicly means ... to transmit a performance for commercial

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purposes.” In addition, this interpretation overlooks, as Congress did not, the possibility that even non-commercial transmissions to the public may diminish the value of a copyright. Finally, like Redd Horne, On Command is factually distinguishable, as successive transmissions to different viewers in that case could be made using a single copy of a given work. Thus, at the moment of transmission, any of the hotel's guests was capable of receiving a transmission made using a single copy of a given movie. As a result, the district court in this case erred in relying on On Command.

Plaintiffs also rely on Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277 (3d Cir.1991), in which the Third Circuit interpreted § 106(3) of the Copyright Act, which gives the copyright holder the exclusive right “to distribute copies ... of the copyrighted work to the public,” 17 U.S.C. § 106(3) (emphasis added). The court concluded that “even one person can be the public for the purposes of section 106(3).” Ford, 930 F.2d at 299 (emphasis added). Commentators have criticized the Ford court for divesting the phrase “to the public” of “all meaning whatsoever,” 2 Nimmer & Nimmer, supra, § 8.11[A], at 8-149, and the decision does appear to have that result. Whether this result was justified in the context of the distribution right is not for us to decide in this case. We merely note that we find no compelling reason, in the context of the transmit clause and the public performance right, to interpret the phrase “to the public” out of existence.

In sum, we find that the transmit clause directs us to identify the potential audience of a given transmission, i.e., the persons “capable of receiving” it, to determine whether that transmission is made “to the public.” Because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances “to the public,” and therefore do not infringe any exclusive right of public performance. We base this decision on the application of undisputed facts; thus, Cablevision is entitled to summary judgment on this point.

This holding, we must emphasize, does not generally permit content delivery networks to avoid all copyright liability by making copies of each item of content and associating one unique copy with each subscriber to the network, or by giving their subscribers the capacity to make their own individual copies. We do not address whether such a network operator would be able to escape any other form of copyright liability, such as liability for unauthorized reproductions or liability for contributory infringement.

In sum, because we find, on undisputed facts, that Cablevision's proposed RS-DVR system would not directly infringe plaintiffs' exclusive rights to reproduce and publicly perform their copyrighted works, we grant summary judgment in favor of Cablevision with respect to both rights.

CONCLUSION

For the foregoing reasons, the district court's award of summary judgment to the plaintiffs is REVERSED and the district court's injunction against Cablevision is VACATED. The case is REMANDED for further proceedings consistent with this opinion.

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