Antitrust Law Daily Wrap Up, RICO—3d Cir.: College credit transfer company did not violate RICO or Lanham Act in its use of competitor’s copyrighted materials, (Feb 6, 2015)

By Edward L. Puzzo, J.D.

AcademyOne, Inc., a company that offered online information used to determine the transferability of college credits, did not violate RICO nor the Lanham Act when it inadvertently used copyrighted material from its competitor CollegeSource, Inc. on its own website, the Third Circuit U.S. Court of Appeals in Philadelphia has ruled (CollegeSource, Inc. v. AcademyOne, Inc., February 5, 2015, Vanaskie, T.).

CollegeSource and AcademyOne both utilize course catalogs and information to serve schools and individual students seeking to transfer credits from one school to another.

CollegeSource offered three products: (1) CollegeSource Online, which provides electronic access to over 50,000 college course catalogs; (2) Transfer Evaluation System, an online database of equivalency-related data culled from CollegeSource’s library of course catalogs; and (3) CataLink, a service used by schools to electronically distribute course catalogs by hosting them on CollegeSource’s servers.

AcademyOne offers two products: (1) the Course Equivalency Management Center, that allows faculty to evaluate academic courses and curriculum at different institutions to make decisions on credit equivalency and (2) the National Course Atlas, a database of current course information from about 4,000 colleges.

Basis of claims. CollegeSource had always taken steps to prevent competitors from reproducing its materials. Its full page “Copyright and Disclaimer” stated that “CollegeSource digital catalogs are derivative works owned and copyrighted by CollegeSource, Inc. . . . . Catalog content is owned and copyrighted by the appropriate school,” and declared that distribution and non-commercial use were prohibited.

AcademyOne independently obtained certain college course catalogs by downloading them directly from school websites and by hiring subcontractors to do the same. Some of the catalogs downloaded by AcademyOne’s subcontractor were found to contain CollegeSource’s marks. When alerted to this fact by a cease-and-desist letter from CollegeSource, AcademyOne agreed to remove the offending files from its website.

Nevertheless, CollegeSource later brought a number of claims against AcademyOne, including civil Racketeer Influenced and Corrupt Organizations Act (RICO) claims, and claims of trademark infringement and false advertising under the Lanham Act. On October 25, 2012, the federal district court in Philadelphia granted summary judgment to AcademyOne on all claims. CollegeSource appealed, challenging the grant of summary judgment, and the lower court’s dismissal of its RICO claims. The appellate court affirmed the lower court’s rulings.

RICO claims. CollegeSource challenged the lower court’s dismissal of its civil RICO claims. Those claims required a showing that a defendant conducted, or conspired to conduct, an enterprise through a pattern of racketeering activity, and that this activity was the proximate cause of an injury to the plaintiff’s business or property.” The “pattern of racketeering activity” element required at least two acts of racketeering activity, and the lower court concluded that CollegeSource had failed to allege two legally sufficient predicate acts.

On appeal, CollegeSource alleged three predicate acts. First, CollegeSource claimed that AcademyOne violated the National Stolen Property Act (NSPA) when it received digital materials from its subcontractor which contained CollegeSource’s marks. The court responded that, under the 1985 Supreme Court case of Dowling v. United States (473 U.S. 207), the theft of intellectual property does not violate the NSPA.

Second, CollegeSource alleged obstruction of justice as a predicate act. They alleged that AcademyOne had obstructed justice by submitting false affidavits when personal jurisdiction by a California district court was an issue earlier in the litigation. But the court stated that it had never recognized obstruction of justice as a viable RICO predicate except in cases involving witness intimidation.

Finally, CollegeSource alleged wire fraud as a predicate act. The allegedly fraudulent communication was an email from the founder of AcademyOne to CollegeSource stating that they had removed all course content PDF files, and would honor CollegeSource’s request and would remove its content, when in fact it did not fully eliminate all CollegeSource materials during its initial review and it also preserved copies of the CollegeSource files on its servers. Wire fraud, the court explained, requires a scheme or artifice to defraud for the purpose of obtaining money or property, participation by the defendant with specific intent to defraud, and use of the mails or wire transmissions in furtherance of the scheme. The allegations here, stated the court, were essentially a disagreement as to the meaning of the statements in the email, which does not rise to the level of fraud.

Thus CollegeSource had failed to allege any legally sufficient predicate acts, and the court affirmed the lower court’s dismissal of the claims.

Lanham Act claims. CollegeSource’s Lanham Act claims arose from AcademyOne’s purchase of targeted online advertising (known as AdWords) offered by search-engine companies such as Google, which produced one of AcademyOne’s websites in its search results when users entered the terms “college source” or “collegesource.”

To succeed on a claim for trademark infringement or unfair competition under the Lanham Act, the court explained, CollegeSource must prove that it owned the mark at issue, that the mark was valid and legally protectable, and that AcademyOne’s use of the mark was likely to create confusion. The lower court focused on the third element, as the other two elements were not in dispute. It concluded that AcademyOne’s use of CollegeSource’s mark was not likely to cause confusion because (a) Google’s advertisements in its search results have distinct labeling, (b) Internet users seeking college transfer information are expected to be savvy, and (c) there was no evidence of actual confusion. The appellate court found the lower court’s reasoning in this regard compelling, and affirmed the dismissal.

The case is No. 12-4167.

Attorneys: Frank R. Emmerich, Jr. (Conrad O'Brien), and Alex Papaefthimiou (Law Offices of Darren Quinn) for CollegeSource, Inc. Aliza R. Karetnick (Duane Morris) for AcademyOne, Inc.

Companies: CollegeSource, Inc.; AcademyOne, Inc.

Cases: RICO Advertising DelawareNews NewJerseyNews PennsylvaniaNews