Spamming Facebook Will Cost Power Ventures $3M

SAN JOSE, Calif. (CN) - A now-defunct social networking aggregator owes $3 million for defrauding Facebook and spamming its users, a federal judge ruled.

Facebook sued Power Ventures and its CEO Steve Vachani in 2009. The social networking giant claimed Power Ventures masqueraded as an aggregator, enticing users to combine multiple social networking accounts into a single experience on its Power.com website.

Power.com allegedly solicited Facebook login information from users to scrape proprietary data for display on its own website. Facebook said next sent thousands of unsolicited emails - using Facebook's own servers - to the Facebook friends of its users, promoting its product and indicating the message was from "The Facebook Team."

Despite accusations by digital libertarians that Facebook flaunts California's computer fraud laws and the federal CAN-SPAM act to stifle innovation, U.S. District Judge James Ware ruled for Facebook without a trial in early 2012. He then asked for briefs from all parties regarding damages and Vachani's personal liability in the matter.

Before Ware could issue a final judgment, however, the Cayman Islands-based Power Ventures filed for bankruptcy. Days later, Ware closed the case administratively and retired from the bench.

Facebook reopened the case earlier this year, after a bankruptcy judge dismissed Power Ventures' case. Vachani and his company asked the new judge - U.S. District Judge Lucy Koh - to reconsider Ware's summary judgment, while Facebook demanded an award of damages.

Koh refused to reconsider the judgment on Sept. 25, finding "no manifest injustice or clear error" in Ware's findings that the company had violated CAN-SPAM and California computer fraud laws, known as CFAA. She also found Vachani personally liable.

"The unlawful activities that led to Power Venture's liability under the three relevant statutes were 1) creating the launch promotion and the software that caused Facebook's servers to send out the misleading emails to Facebook users; 2) circumventing technical barriers to take, copy, or make use of data from the Facebook website without permission; 3) accessing Facebook without authorization and obtaining information from the Facebook website without authorization," Koh wrote. "Drawing all reasonable inferences in the light most favorable to Vachani, the court concludes that the undisputed facts prove that Vachani authorized and directed these activities."

She continued: "Vachani's admission that he controlled and directed 'the activities related to the use of the Power 100 campaign in conjunction with Facebook users' suffices to show that there is no genuine dispute regarding whether he led the company's quest to obtain proprietary Facebook information, as that information was a necessary ingredient to the Power 100 Campaign. Ultimately, the court concludes that these uncontroverted facts demonstrate Vachani was the 'guiding spirit' behind Power Venture's efforts to send the misleading spam emails to Facebook users, and thus should be held personally liable."

Although Facebook waived its right to attorneys' fees and exemplary damages, it sought treble statutory damages for the CAN-SPAM violations and compensatory damages under CFAA. The federal law provides for $100 in damages for each spam email sent - and Power Ventures did not contest it had sent out 60,627 messages to Facebook users.

"Exercising its broad discretion to determine an appropriate damages award, the court finds that the $18 million award requested by Facebook is unnecessary to address the deterrent and punitive purposes of a statutory damages award," Koh wrote. "Without deciding whether the requested $18 million award would violate defendants' due process rights, the court declines to award that amount and finds it sufficient to award $50 per email communication that was sent. This decision is consistent with other cases where courts have declined to award the maximum statutory damages of $100 per violation, instead granting awards of either $50 or $25 per violation of the CAN-SPAM Act."

The judge also declined to treble the award "given the large size of the primary award amount."

"Ultimately, a statutory damages award of $3,031,350 along with a permanent injunction which this court grants will adequately serve the purpose of punishment and deterrence in this case," Koh wrote.

She also awarded an unspecified amount for Facebook's investigative costs under CFAA, and permanently ordered Power Ventures to cease its activities against the social network.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit