Varinder Dhillon
Professor Risch
Universal Communication System Inc. v. Lycos, 478 F.3d 413 (1st Cir. 2007)
Parties: Universal Communication Systems and CEO Zwebner as plaintiffs/appellants, Lycos as defendant/appellee.
Procedural History: Plaintiffs brought complaint in Southern District of Florida. Defendant motioned to transfer case to District of Massachusetts. Motion was granted. Defendant motioned to dismiss for failure to state a claim. District Court dismissed suit for failure to state claim. Plaintiffs appealed. First Circuit reaffirmed dismissal.
Facts: Universal Communication Systems (UCS) at one point provided telecommunications services but now develops solar-powered water extraction systems. Zwebner is CEO of UCS and is a citizen of the UK and Israel. Lycos operates a network of web sites devoted to a wide array of content including Quote.com, which provides stock information and financial date. Additionally, Lycos operates RagingBull.com which hosts financially-oriented message boards including user postings of publicly-traded companies. Individuals must register with Lycos in order to post messages on Raging bull message boards and must sign “subscriber agreement†requiring users to comply with state and federal securities laws. Starting in 2003, postings were made on RagingBull.com disparaging the “financial condition, business prospects and management integrity†of UCS.
Issues: Whether the district court properly denied a leave to amend the complaint because of the immunity provided by 47 U.S.C 230? Can UCS seek a cause of action against Lycos for trademark dilution? Did UCS plead its fraud claim with sufficient particularity to withstand dismissal under FRCP?
Holding: Yes, the broad immunity provided by 47 U.S.C. 230 covers Lycos. No, the First Amendment precludes holding Lycos liable for trademark dilution. No, UCS only alleges conclusory allegations of fraud and does not meet FRCP standard.
Reasoning: §230 reads that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider,†and that “no cause of action may be brought and no liability may be imposed.†Lycos is an “interactive computer service†provider because the Raging Bull “enables computer access by multiple users to a computer server.†Furthermore, the individual postings on Ragingbull.com is a clear example of an information content provider. In regards to Lycos’ role as “publisher,†§ 230 immunity extends not only to “exercise of a publisher’s traditional editiorial role†but also to Lycos’ limited “construct and operation†of its websites. Because Florida securities and cybersquatting law would involve holding Lycos liable as “publisher,†these claims are barred by §230. Finally, UCS’ trademark dilution must fail because even though a trademark is being used in disparaging remarks, such remarks are “nominative fair use.†“UCSY†is simply referring to an existing company and use of the trademark is employed for the purposes of indicating that a particular company is the subject of a particular message board. (The remaining issue of whether UCS has pled the securities fraud claim with sufficient particularity is dispelled with by the court’s language that “USC does not purport to state a claim for securities fraud based on negative effects that the Raging Bull postings had on the company’s stock price; in the absence of further factual allegation, it cannot proceed merely on the hope that it will find more.â€
Professor Risch
Universal Communication System Inc. v. Lycos, 478 F.3d 413 (1st Cir. 2007)
Parties: Universal Communication Systems and CEO Zwebner as plaintiffs/appellants, Lycos as defendant/appellee.
Procedural History: Plaintiffs brought complaint in Southern District of Florida. Defendant motioned to transfer case to District of Massachusetts. Motion was granted. Defendant motioned to dismiss for failure to state a claim. District Court dismissed suit for failure to state claim. Plaintiffs appealed. First Circuit reaffirmed dismissal.
Facts: Universal Communication Systems (UCS) at one point provided telecommunications services but now develops solar-powered water extraction systems. Zwebner is CEO of UCS and is a citizen of the UK and Israel. Lycos operates a network of web sites devoted to a wide array of content including Quote.com, which provides stock information and financial date. Additionally, Lycos operates RagingBull.com which hosts financially-oriented message boards including user postings of publicly-traded companies. Individuals must register with Lycos in order to post messages on Raging bull message boards and must sign “subscriber agreement†requiring users to comply with state and federal securities laws. Starting in 2003, postings were made on RagingBull.com disparaging the “financial condition, business prospects and management integrity†of UCS.
Issues: Whether the district court properly denied a leave to amend the complaint because of the immunity provided by 47 U.S.C 230? Can UCS seek a cause of action against Lycos for trademark dilution? Did UCS plead its fraud claim with sufficient particularity to withstand dismissal under FRCP?
Holding: Yes, the broad immunity provided by 47 U.S.C. 230 covers Lycos. No, the First Amendment precludes holding Lycos liable for trademark dilution. No, UCS only alleges conclusory allegations of fraud and does not meet FRCP standard.
Reasoning: §230 reads that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider,†and that “no cause of action may be brought and no liability may be imposed.†Lycos is an “interactive computer service†provider because the Raging Bull “enables computer access by multiple users to a computer server.†Furthermore, the individual postings on Ragingbull.com is a clear example of an information content provider. In regards to Lycos’ role as “publisher,†§ 230 immunity extends not only to “exercise of a publisher’s traditional editiorial role†but also to Lycos’ limited “construct and operation†of its websites. Because Florida securities and cybersquatting law would involve holding Lycos liable as “publisher,†these claims are barred by §230. Finally, UCS’ trademark dilution must fail because even though a trademark is being used in disparaging remarks, such remarks are “nominative fair use.†“UCSY†is simply referring to an existing company and use of the trademark is employed for the purposes of indicating that a particular company is the subject of a particular message board. (The remaining issue of whether UCS has pled the securities fraud claim with sufficient particularity is dispelled with by the court’s language that “USC does not purport to state a claim for securities fraud based on negative effects that the Raging Bull postings had on the company’s stock price; in the absence of further factual allegation, it cannot proceed merely on the hope that it will find more.â€