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Facebook Spam Suit Befuddles 9th Circ.

SAN FRANCISCO (CN) - Wrangling conflicting statutory interpretations and mixed analogies, the Ninth Circuit on Wednesday sought clarity to Facebook's claims that a now-defunct social media aggregator broke the law by working around an IP address block.

"What I don't like about this argument today is that you're all using different phrases," Judge Kim McLane Wardlaw said at the hearing. "I feel like something's being obfuscated here."

Facebook had sued Power Ventures and its CEO Steve Vachani in 2009, claiming the company masqueraded as an aggregator in order to spam Facebook users - which Facebook claimed violated the Computer Fraud and Abuse Act.

According to the lawsuit, solicited Facebook login information from users to obtain proprietary data for display on its own website, then sent thousands of unsolicited emails - using Facebook's own servers - to the friends of Facebook users, promoting its product and indicating the message was from "The Facebook Team."

U.S. District Judge James Ware ruled for Facebook without a trial in 2012, finding that Power Ventures violated both the Computer Fraud and Abuse Act and the CAN-SPAM Act, and U.S. District Judge Lucy Koh refused to reconsider the judgment on Power Ventures' request.

Koh ordered Power Ventures to pay $3 million in damages and also issued a permanent injunction, and the company appealed the ruling to the Ninth Circuit.

Arguing for Power Ventures, Amy Anderson told the three-judge panel that the case is not an access issue but an ownership issue.

Circuit Judge Mary Murguia pointed out that Power Ventures had - after receiving notice that its access to Facebook was not permitted - admitted that it took and copied data from Facebook's website without permission to do so.

"Why does this not establish that Power was not authorized to access Facebook?" she Murguia asked.

"Facebook doesn't have any ownership of the data, so there's no standing and no impairment whatsoever, and Facebook never offered that there is," Anderson said.

Anderson added that since all of Power Ventures' communications were going through Facebook, "no one believes that Facebook is sending the messages."

"It's just as anybody with a Gmail account sends an email with an 'at' address, no recipient would take that to say that Google is sending them an email," she said.

But Murguia noted that even after Facebook sent Power Ventures cease-and-desist letters, the company did not cease and desist.

Vachani, arguing on his own behalf, told the panel that it's important to understand that Facebook and Power Ventures were at one point the top two venture-funded companies in the Silicon Valley.

"Power [Ventures] did not win this battle," he said. "You wonder why seven years later Facebook is fighting over an artificially created spam issue."

Vachani said that the federal court's injunction is "vague" and severely restricts former Power Ventures employees' future work opportunities.

"This injunction is completely unprecedented, and it goes into uncharted territory as far as personal liability," he said. "If it does not get overturned, the case at least deserves a fair trial."

Jamie Williams, a legal fellow at the Electronic Frontier Foundation, also argued on behalf of Power Ventures, claiming that the lower court's decision "could have terrible consequences on Internet users across the board."

Circuit Judge Susan Graber then compared the case to a trespass dispute.

"If I blacklist someone and say I don't want you to come to my site, why isn't that inherently wrongful just the same as any trespass is inherently wrongful?" Graber said.

"You can't take trespass law in the physical world and blindly apply it to the Internet," Williams replied. "It's a different place and different norms apply."

She referred to the precedent case U.S. v. Nosal, in which the Ninth Circuit ruled that the Computer Fraud and Abuse Act is not a massive misappropriation statute.

"This is a case where Facebook did have options, but they chose to bring an action under the act," she said.

"Those statutes have much more serious consequences and, quite frankly, have the ability to put a company out of business, as we've seen in this case."

Eric Shumsky, arguing for Facebook, opened by saying that "the record on what happened here is absolutely striking."

Wardlaw stopped him to point out that the Computer Fraud and Abuse Act is not a trespass statute, but a "very heavy-handed law designed to make someone criminally liable for hacking."

"Hacking in this context is really akin to trespass," Shumsky replied.

Graber asked whose authorization is required in this case.

"Let's say that I have loaned my house to somebody while I'm out of town and they give permission for someone to come to the property," she said. "Even if I don't like that person and wouldn't have allowed them to come on to the property, isn't their authority enough? Whose authority counts in this peculiar context?"

She added that before Facebook sent a cease-and-desist letter, Power Ventures may not have been doing anything wrong.

"It's like the person who comes to my house and I kick them out," she said. "They weren't doing anything wrong before I told them to leave."

In her rebuttal, Anderson amended Graber's analogy to say that the situation is more like Facebook owns "a storage unit facility where users store their data under their own lock and key."

"Users have the right to give the key to Power or to anybody else to access their data," she said.

The panel did not indicate how or when it expects to rule.

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