Antitrust Law Daily Wrap Up, ADVERTISING—9th Cir.: Social media company liable for computer trespass involving Facebook users’ data, (Jul 13, 2016)

By Linda O’Brien, J.D., LL.M.

In an action by Facebook against a social media integration company for accessing Facebook users’ data and initiating form emails that promoted its website, the district court properly determined that the defending company was liable for computer trespass for intentionally assessing Facebook’s data and computers without authorization, the U.S. Court of Appeals in San Francisco has held. However, the company’s emails and internal Facebook messages transmitted to Facebook users were not materially misleading. Thus, the district court’s grant of summary judgment in favor of Facebook was affirmed in part and reversed in part (Facebook, Inc. v. Power Ventures, Inc., July 12, 2016, Graber, S.).

Power Ventures, founded by Steven Vachani, operated a social networking website at www.Power.com that offered to integrate users’ social media accounts. In December 2008, Power Ventures began a promotional campaign that promised users $100 if they invited and signed up new users, and sent invited Facebook users emails indicating that the invitation was from Facebook. Facebook sent Power Ventures a "cease and desist" letter, instructing the website operator to terminate its activities. After Power Venture continued the promotion, Facebook filed suit against Power Ventures and Vachani, asserting claims for violations of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act), the Computer Fraud and Abuse Act (CFAA), and California Penal Code § 502 for sending misleading and unsolicited emails to Facebook users, scraping Facebook’s data from user accounts, and bypassing Facebook’s attempts to block the company.

In February 2012, the district court issued an order granting summary judgment to Facebook on the CAN-SPAM Act, CFAA and § 502 claims. In September 2013, the court also found Vachani personally liable, imposed a permanent injunction, and awarded Facebook $3,031,350 plus compensatory damages. Power Ventures and Vachani appealed.

CFAA. The district court properly determined that Power Venture intentionally assessed Facebook’s computers knowing that it was not authorized to do so and was therefore liable under the CFAA, the appellate court found. It was undisputed that Facebook employees spent many hours analyzing, investigating, and responding to Power’s actions. Therefore, Facebook suffered a loss under the CFAA.

Furthermore, although Power Ventures users initially gave it permission to use Facebook’s computers to disseminate its messages, Facebook expressly rescinded that permission when it issued its cease and desist letter to Power Ventures in December 2008, the court explained. The letter informed Power Ventures that it violated Facebook’s terms of use and demanded that Power Ventures stop soliciting Facebook user information, using Facebook content, and interacting with Facebook through automated scripts. The evidence showed that Power Ventures unequivocally knew that it no longer had authorization to access Facebook’s computers but continued to access Facebook’s data anyway. In the court’s view, the consent that Power Ventures received from Facebook users was insufficient to grant continued authorization to access Facebook’s computers after Facebook’s express revocation of permission.

CAN-SPAM Act. However, the district court erred in finding that Power Ventures’ transmitted messages were materially misleading in violation of the CAN-SPAM Act, the appellate court determined. The CAN-SPAM Act grants a private right of action for a provider of Internet access services that is adversely affected by the transmission of a message that contains, or is accompanied by, header information that is materially false or misleading. The court first noted that the external emails generated when a Power Venture user created a Facebook event accurately identified the person who initiated the messages. Second, the internal Facebook messages authored by Power Ventures that users transmitted to their Facebook friends included both Power Venture’s name and a link to the Power Venture website so recipients would understand that Power Venture had drafted the message or had a part in its construction. Accordingly, the emails and internal messages sent through Power Ventures’ promotional campaign were not materially misleading, in the court’s view.

The case is No. 13-17102.

Attorneys: Eric A. Shumsky and Indra Neel Chatterjee (Orrick Herrington & Sutcliffe, LLP) for Facebook, Inc. Amy Sommer Anderson (Aroplex Law) for Power Ventures, Inc. and Steven Suraj Vachani.

Companies: Facebook, Inc.; Power Ventures, Inc.

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