Antitrust Law Daily Wrap Up, ADVERTISING—D. Md.: Internet service provider lacked standing to sue under state anti-spam statutes, (Aug 14, 2013)

By Edward L. Puzzo, J.D.

A purported Internet service provider did not have standing to sue an issuer of "spam" e-mail under state or federal anti-spam statutes when it was not a bona-fide ISP and where it actively sought to receive the e-mail it complained of, the federal district court in Greenbelt, Maryland has ruled (Beyond Systems, Inc. v. Kraft Foods, Inc., August 9, 2013, Messitte, P.).

Beyond Systems, an ostensible internet service provider doing business in Maryland, received spam e-mails from a subsidiary of Kraft Foods advertising Gevalia coffee. Beyond had been forwarded the spam e-mails from Hypertouch, another ostensible internet service provider doing business in California. It sought to sue Kraft under both Maryland and California anti-spam statutes in federal court.

Hypertouch's principal activity was to attract and harvest spam e-mails and use them as the basis of lawsuits under California anti-spam laws, or forward them to Beyond, who would use them as the basis of lawsuits under Maryland anti-spam laws. Hypertouch and Beyond, owned by two brothers, each provided a limited amount of typical ISP functions, but Beyond, it was noted, had earned approximately 90% of its annual revenue from negotiated settlements with suspected spammers. The two ISPs, unlike other ISPs, turned off software filters meant to block or reject spam, and indeed used "spam-traps" for hundreds of e-mail accounts whose sole purpose was to cause spammers to send spam to them.

Bona fide requirement for standing. Kraft sought summary judgment against Beyond on the grounds that it was not a bona fide Internet service provider and therefore lacked standing, but Beyond responded that the state anti-spam statute did not incorporate a "bona fide" requirement for standing. Kraft acknowledged that the statutes did not expressly use the term "bona fide," but argued that the term “service provider,” must have some meaning in order to differentiate those providing internet services to a broad customer base from, for instance, the single individual who is able to connect a very few persons to e-mail service.

The court agreed with Kraft, stating that requiring an entity to actually be what it purports to be in order to qualify for benefits under a statute is not in reality adding an extra-statutory requirement at all. Citing an earlier case, the Court ruled that statutory standing should be denied to plaintiffs who purposely structure themselves to look like one of the limited entities eligible to sue but do so for the primary purpose of collecting damages and settlement from litigation. The Court found that to be eligible to sue under either the Maryland or California anti-spam statutes, the purported ISP must function primarily and substantially as an ISP, which is to say, it must be bona fide.

The case is Civil Action No. PJM 08-409.

Attorneys: Anthony Adrian Onorato (Steptoe and Johnson LLP) for Beyond Systems, Inc. Ari Nicholas Rothman (Venable LLP) for Kraft Foods, Inc.

Companies: Beyond Systems, Inc.; Kraft Foods, Inc.

Cases: Advertising Privacy MarylandNews