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Electronic and Internet Law
in North Carolina

In the electronic age, disputes regarding computers, e-mail, the Internet, servers, domain names, hard drives etc. are increasing. Below are some topics on which the courts in North Carolina (including the Fourth Circuit) have rendered decisions.

Cybersquatting

Congress enacted the Anticybersquatting Consumer Protection Act (ACPA) to address the problem created when a person buys a domain (e.g. www.ford.com) for the purpose of holding the domain hostage.

In one case, the defendant bought the domain names "PinehurstResort.com," "PinehurstResorts.com," and "Pinhurst.com." The defendant had purchased many such domains, with names that had no real association to the defendant's business. The operator of Pinehurst Golf Resort sued the defendant for taking these domains. The defendant admitted that it wanted to have access to users of the web trying to find Pinehurst Golf Resort. The federal court in North Carolina ruled that the defendant violated the ACPA. It ordered the defendant to cease its conduct, and imposed a statutory penalty of $100,000 (one for each of two properly pled violations) and also attorneys fees. Pinehurst, Inc. v. Wick, 256 F. Supp. 2d 424, 426 (M.D.N.C. 2003).

In another case, a cyber-squatter registered the website "peta.org." The website called itself "People Eating Tasty Animals." The defendant registered other sites in a similar manner. The plaintiff, PETA (i.e. People for the Ethical Treatment of Animals), sued and prevailed. The defendant argued that its site was a parody of the plaintiff's site. The court (Fourth Circuit) noted the potential for confusion to the public, even though the defendant's site did have a link to the plaintiff's site. People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359 (4th Cir. 2001).

In another case, the defendant registered the domain "vw.net." The court found that the defendant registered this domain with the purpose of selling it to Volkswagen, and that the defendant had a bad faith intention to profit from the domain. The Fourth Circuit affirmed the finding of a violation of the ACPA. Virtual Works, Inc. v. Volkswagen of Am., Inc., 238 F.3d 264, 266 (4th Cir. 2001).

In another case, the plaintiff (in the apparel industry) had the trademark rights to "RIPS." The defendant had the website "www.rips.com." The parties had a complicated history of litigation, most of which pertained to the plaintiff's apparel product line (and also to photographs for which the defendant claimed a copyright). The defendant used the website for another line of business. The federal court ruled that the defendant violated ACPA, and ordered it to transfer the site to the plaintiff. Asia Apparel, LLC v. RIPSwear, Inc. (W.D.N.C. Sept. 17, 2004).

The plaintiff does not, however, prevail in all cases under the ACPA. In another case, the plaintiff had a company called "Freebie, Inc." The defendant had the domain freebie.com and operated a company called Freebies Publishing. The court held that the term "freebies" is generic and cannot be protected as a trademark, and that the defendant did not violate ACPA. Retail Servs. v. Freebies Publishing, 364 F.3d 535 (4th Cir. 2004).

Digital Millennium Copyright Act

In 2000 Congress enacted the Digital Millennium Copyright Act, which largely provides protection (or "safe harbor") to internet service providers (ISP's).

In one case, the defendant ISP allowed subscribers to post photographs of commercial real estate on its website. The plaintiff sued on the basis that it had a copyright in those photographs. The court held that the provider was not liable for copyright infringement, because it was merely a conduit for those persons violating the copyright. CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544 (4th Cir. Md. 2004).

CAN-SPAM Act

Congress also enacted legislation to curb "spam," i.e. the use of mass email communications to market a product (resulting in "junk email"). The remedies for such a violation, however, can be tricky. In one case, the plaintiff hosted websites, and he received emails for cruise vacations. He called the sender to complain, but he refused to use the opt-out method set forth in the email (stating that it would only result in receiving more junk emails). He sued the sender of the email. The federal court (Fourth Circuit) rejected his claim, on the basis that the sender correctly identified itself, and it provided an opt-out method. Further, he failed to show a "pattern or practice" of refusing to remove people from the email solicitations. Omega World Travel, Inc. v. Mummagraphics, Inc., 469 F.3d 348 (4th Cir. Va. 2006).

Personal Jurisdiction

One of the more commonly litigated issues in cases pertaining to postings on the Internet is that of "personal jurisdiction." This means that that the plaintiff sues the defendant in North Carolina for postings on the internet, and the issue is whether the defendant's conduct on the Internet (and otherwise) is sufficient for a court in North Carolina to exercise jurisdiction over the defendant.

In one case, the defendant lived in Georgia. He posted defamatory statements about the plaintiff on the internet. The posting included allegations that the plaintiff committed embezzlement, committed theft, was a cheat and a liar, committed felonies, etc. The defendant admitted to posting messages on internet bulletin boards regarding the plaintiff's "shooting camps" in North Carolina, which were attended by people from across the southeast. The court held that North Carolina did not have personal jurisdiction over the defendant because "plaintiff has presented no evidence suggesting that defendant, through his internet postings, manifested an intent to target and focus on North Carolina readers." Even though the defendant "understood that some of the participants in the bulletin board discussions were not located in North Carolina[, t]hese assertions are evidence of a lack of focus on North Carolina residents." "For internet activity the effect on a plaintiff is not enough." Dailey v. Popma, 191 N.C. App. 64, 75 (2008).

This case followed a case from 2005 in which a person bought furniture from a Vermont company, which had a "passive website." When the furniture was delivered by a freight company, the plaintiff was injured. The court held that North Carolina did not have jurisdiction over the Vermont merchant. Havey v. Valentine, 172 N.C. App. 812 (2005).

In another case, a North Carolina resident purchased a tractor from the defendant, through eBay. The defendant, residing in Tennessee, did not have a presence in North Carolina. The parties exchanged emails, and the plaintiff wired money to the defendant. The defendant's listings on eBay did not target North Carolina. The court held that North Carolina did not have jurisdiction over the Tennessee seller. Buckland v. Hobbs (2006). The court also rejected an argument that the defendant was subject to jurisdiction based on N.C. Gen. Stat. Sec. 1-75.4(4)(c), pertaining to cases where "unsolicited bulk commercial electronic mail was sent into or within this State by the defendant using a computer, computer network, or the computer services of an electronic mail service provider in contravention of the authority granted by or in violation of the policies set by the electronic mail service provider." "Plaintiff made no evidentiary showing that defendant misused an electronic mail service."

In another case, a North Carolina resident (the plaintiff) made ornaments for trees. A competitor in Kentucky advised the plaintiff to cease infringing her copyrights, and also sent a similar letter to a customer of the plaintiff in Florida . The plaintiff sued the defendant, in North Carolina, and the defendant argued that she did not have sufficient contacts with North Carolina to subject her to jurisdiction here. The plaintiff argued that the letter sent to her was a contact with North Carolina, as well as the defendant's website (which can be accessed by persons in North Carolina), and that $150 of the defendant's products were sold in North Carolina. The court held that it did not have jurisdiction over the defendant. It also noted that the defendant's passive (non-interactive) website did not indicate a manifest intent to target and focus on North Carolina. Woods Int'l, Inc. v. McRoy, 436 F. Supp. 2d 744 (M.D.N.C. 2006).

In another case, the defendant had a website which allegedly posted (or encouraged the posting of) defamatory material about the plaintiff, who trained miniature horses as guide-animals for the visually-impaired. The court ruled that the website was semi-interactive, but it was targeted worldwide and not to North Carolina. Burleson v. Toback, 391 F. Supp. 2d 401 (M.D.N.C. 2005).

Uniform Electronic Transactions Act (electronic signatures etc.)

In 2000 the North Carolina Legislature enacted legislation to address issues arising when parties deal by e-mail and through other electronic means. There are several components of the Act, all of which cannot be addressed here.

Our Supreme Court dealt with one issue arising under this Act in 2010. In this case, the parties had reached a resolution of their dispute (which pertained to land), and they exchanged a proposed "settlement agreement" by email. One party to the settlement, however, attempted to rescind the settlement. The other party contended that they reached a binding agreement. The problem was that because the settlement involved lands, the statute of frauds required that the settlement have a "signature." The Court of Appeals held that the exchange of emails constituted a "signature" within the Electronic Transactions Act, which generally recognizes an electronic signature (defined as "electronic sound, symbol, or process attached to, or logically associated with, a record and executed or adopted by a person with the intent to sign the record"). The Supreme Court disagreed, however, because the entire exchange of emails indicated that the parties contemplated that that the actual physical settlement agreement would be signed, and thus "the parties did not agree to the use of electronic signatures in lieu of physical signatures in this transaction." Powell v. City of Newton, 703 S.E.2d 723, 728 (2010) (the Court nevertheless found that the agreement was binding under the doctrine of judicial estoppel).

Expert Fees for Inspection of Hard Drive

In one case, a party to a business dispute requested that an independent expert be appointed to analyze hard drives. The expert ultimately sent a bill of $22,650.12 for its services (at $250 per hour), which was also supported by several other persons in the industry as to the reasonableness of the charge. The party requesting the inspection agreed to pay only approximately half of this amount, and the dispute went to the judge. The judge ruled for the expert, and the Court of Appeals affirmed. Point Intrepid, LLC v. Farley (2011).

Privacy Rights to Work Computers

Many cases have held that an employee (in the public or private sector) does not have a right of privacy in his emails sent from work, and other electronic information stored at work (or at least that the employer has some right to inspect those emails and that electronic information). In one case, a government employee downloaded illegal images to his computer at work. A co-employee removed his hard drive. The employee argued (in the criminal proceeding against him) that this violated his Fourth Amendment rights from unreasonable searches and seizures. The court rejected this argument, stating, "In the final analysis, this case involves an employee's supervisor entering the employee's government office and retrieving a piece of government equipment in which the employee had absolutely no expectation of privacy--equipment that the employer knew contained evidence of crimes committed by the employee in the employee's office." The court further noted, "This situation may be contrasted with one in which the criminal acts of a government employee were unrelated to his employment." United States v. Simons, 206 F.3d 392, 401 (4th Cir. Va. 2000).

The United States Supreme Court dealt with a similar issue in 2010. In this case, a police officer was issued a pager, and he used the pager for personal purposes. He claimed that he was allowed to do so. The employer had a written policy stating that the employee had no privacy in the computers, and it had informed the employees that this applied to the pagers as well. The employer obtained a transcript of the text messages and reprimanded the officer. The employee sued, alleging that the employer violated his Fourth Amendment right to privacy. The Court rejected his claim, but in doing so it did recognize that he had a a reasonable expectation of privacy in the text messages he sent. The Court concluded, however, that the warrantless review of the transcript was reasonable because it was motivated by a legitimate work-related purpose, and because it was not excessive in scope. City of Ontaro v. Quon.

Employee's removal of Hard Drive

The previous section addressed an employee's privacy rights in his work computer (and pager). A somewhat reversed situation, raising the employee's right to take a hard drive home, was addressed in North Carolina in 2010. In this case, an employee and her employer had a dispute as to whether the employee owned certain copyrights (in the employer's catalog). Shortly thereafter, the employee removed the hard drive from her computer and went home for the weekend. She claimed that she did this because she had a presentation on Monday and this was more efficient than using another type of storage device (e.g. jump drive). She was terminated, based on the removal of the hard drive (which contained important information for the company) and based on her assertion of the copyright, and she filed for unemployment compensation. The Employment Security Commission ruled that she was terminated for conduct showing a deliberate disregard "of standards of behavior which the employer has the right to expect of his employee." The Supreme Court affirmed this conclusion, thus denying her unemployment compensation. Binney v. Banner Therapy Prods., 362 N.C. 310, 319 (2008). The Court noted the importance of items on the computer, and the expense to the employer in re-creating the data. The employer had also argued that the data could have been corrupted if the hard drive were dropped. The employer did not have an express policy prohibiting employees from removing the hard drive.

John Kirby has represented and consulted with parties in suits and claims pertaining to computers, electronic information, websites etc. He has, for example, represented an individual whose records were subpoenaed from Yahoo. He has also built and repaired computers computers (laptops and desktops), and has designed and constructed websites.



 
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