INDUSTRY ANALYSIS
Troubling Global Trends Emerging in Online Defamation

The plaintiff, Roger Grace, an eBay seller, sued the buyer and eBay after the buyer had posted negative comments about Grace. The Superior Court of Los Angeles County held that Section 230 of the Act immunizes eBay against liability for libel and violation of the unfair competition law as a publisher of information provided by another person.

Grace appealed the decision to the California Court of Appeal, which upheld the lower court's judgment on the basis of eBay's User Agreement rather than the Act.

With respect to Section 230 of the Act, the Court of Appeal stated that the common law of libel distinguishes between liability as a primary publisher, who is presumed to know the content of the published material, and a distributor, who might or might not know the content of the published matter. A distributor is subject to a different standard of liability, which requires a greater showing of culpability.

Online Distributor

The appeal court held that this section -- which states 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" -- does not provide immunity against liability as a distributor. Therefore, a distributor can be held liable for libel if it knew or had reason to know that the material was defamatory.

However, eBay's Web site User Agreement contained a written release that stated, "Because we are a venue, in the event that you have a dispute with one or more users, you release eBay (and our officers, directors...) from claims, demands and damages (actual and consequential) of every kind and nature, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way connected with such disputes."

In his appeal, Grace argued that the language of the release is not sufficiently precise to encompass a claim against eBay based on defamatory information provided by a third party and that his dispute is not merely a dispute with a user, but a dispute with eBay directly.

The Court of Appeal disagreed, holding that the type of dispute referenced in the release clearly encompasses a dispute with another user relating to comments posted by the user on the Web site.

Broad Language

The court also held that broad language of the release encompasses a claim or demand against eBay based on its displaying of or failure to remove objectionable comments by another user posted on the Web site, as such claim or demand arises out of or is connected with a dispute with another user.

Apart from highlighting the importance of properly drafted Web site user agreements, this case brings up the issue of the expanding area of online defamation claims.

In the past year or so, two trends are taking shape in this area:

First, there has been a substantial increase in the variety, and also the number, of claims based on defamation on the Internet or via e-mail.

Second, courts in a number of countries are increasingly getting more aggressive on both the issue of asserting jurisdiction and awarding higher damages when it comes to online defamation.

For example, on the issue of damages, in the recent decision of Barrick Gold Corporation vs. Lopehandia, the Court of Appeal for Ontario found that libelous postings on the Internet are distinct and merit greater damages awards.

'Limitless International Defamation'

While finding the defendant liable for injury to Barrick Gold Corporation's reputation, the trial court had awarded the plaintiff damages in the amount of CDN$15,000 (US$11,268.88) and dismissed the claim for punitive damages. On appeal, general damages were increased to CDN$75,000 (US$56,354.54), in addition to an award of CDN$50,000 (US$37,566.53) for punitive damages.

In the opinion of the Court of Appeal, the Internet as a medium is virtually boundless, creating virtual communities and a potentially vast global audience and, as such, defamatory statements published on the Internet have the potential to lead to "virtually limitless international defamation." Accordingly, the Appeal Court found that an increase in the general damages award was deemed appropriate under the circumstances.

The court's recognition of the "virtually limitless international" nature of online defamation in this case is at the heart of why companies need to pay extra attention to what they publish online.

Last year, when the High Court of Australia, in Dow Jones & Company vs. Gutnick confirmed the ability of Australian courts to assert jurisdiction over Dow Jones for allegedly defamatory postings online, many thought that this was an isolated decision that would not have a significant impact on a global scale.

International Public Servant

However, this approach is incorrect. For example, in a decision earlier this year (Bangoura v. Washington Post), the Ontario Superior Court of Justice ruled that a plaintiff can bring an Internet libel action in Ontario even though the print version of the publication and the defendants' place of residence were both outside Ontario.

The plaintiff, Cheickh Bangoura, was an international public servant for the U.N. and lived in a number of different countries.

The Washington Post (NYSE: WPO) published three allegedly defamatory articles in its print publications and on its Web site at the time Bangoura was stationed in Kenya.

Bangoura sued the Washington Post in Ontario, which was his current place of residence. The Washington Post brought a motion to stay the action on the grounds that the Ontario court did not have jurisdiction over them because there was no "real and substantial connection" between the action and Ontario or between the defendants and Ontario, and that Ontario was not the most convenient forum for the action.

'Substantial Connection'

The Ontario Court dismissed the motion and held that it did have jurisdiction over the defendants, since the articles were published online and, therefore, accessible in Ontario.

In determining whether there was a "substantial connection," the court found that the damages to the plaintiff's reputation would be greatest in Ontario, where he had established a home and where he also worked at the time of the action.

In addressing whether Ontario was the most convenient forum for pursuing the action, the court held that there would be problems regardless of whether the action was tried in Ontario or the District of Columbia, where the head office of the Washington Post is located. Finally, the court noted that the publication took place in Washington, but the plaintiff's reputation was affected in Ontario.

Both the Washington Post case and the Dow Jones decision bring to focus the fact that those who publish material on the Internet need to realize that they could be hauled into court in any foreign jurisdiction, including those they could not have foreseen at the time of publication.

The Dow Jones decision might have been an interesting topic for a cocktail party and an isolated decision in a far away place a year ago. However, today it would be wise to consider this decision as the law of the land due to the constant shifting nature of the "land" when it comes to online defamation.