A trial team led by J. Douglas Baldridge and Ari N. Rothman from Venable LLP obtained a unanimous jury verdict favoring the rights of online marketers.  Specifically, a jury found that anti-spam plaintiff Beyond Systems, Inc., an alleged Internet service provider owned by Paul Wagner (the brother of anti-spam plaintiff Hypertouch, Inc. owned by Joe Wagner), is “primarily or substantially” engaged in filing anti-spam lawsuits.  Therefore, Beyond Systems is not a bona fide “Electronic Mail Service Provider” under California’s anti-spam statute or a bona fide “Interactive Computer Service Provider” under Maryland’s anti-spam statute.  This jury finding paves the way for the trial judge to decide that service providers like Beyond Systems must be bona fide to sue under California and Maryland law, and that plaintiffs that are “primarily or substantially” engaged in filing anti-spam litigation cannot sue under the statutes.

California’s anti-spam statute allows an “electronic mail service provider” or recipient of fraudulent spam email to sue over that email.  Likewise, Maryland’s anti-spam statute allows an “interactive computer service provider” or a recipient of fraudulent spam email to sue over such email.  Each statute allows a service provider to obtain $1,000 for each unlawful email.

In 2008, Beyond Systems sued Kraft Foods and Connexus Corp. in federal court, and claimed that it was an Internet service provider that received alleged fraudulent emails.  When it became clear that Beyond Systems was primarily and substantially engaged in filing lawsuits and provided services at most as a secondary purpose, the judge ordered a trial on the issue of whether Beyond Systems was a bona fide service provider under the California and Maryland statutes.  Then, at trial, defendants presented the jury with evidence showing that Beyond Systems did everything it could to trap alleged spam; agreed to receive vast amounts of alleged spam from Joe Wagner of Hypertouch; filed dozens of lawsuits across the country over alleged spam based that Beyond Systems trapped and that Joe Wagner of Hypertouch sent to Beyond Systems; generated revenues from litigation that far exceeded revenues generated from alleged services provided to customers; and otherwise functioned to file lawsuits and not as a legitimate service provider.

When confronted with this evidence, the jury found that Beyond Systems was not a bona fide “electronic mail service provider” under California’s anti-spam or an “interactive computer service provider” under Maryland’s anti-spam statute.  Instead, Beyond Systems functioned to “primarily or substantially” file anti-spam lawsuits.

Venable’s client in the case is Connexus Corp.  While we are grateful that the jury found that Beyond Systems was not bona fide but instead primarily or substantially engaged in filing anti-spam lawsuits, the judge must now decide that only bona fide service providers — and not service providers that exist to sue over alleged illegal email — can sue under the California and Maryland statutes.   Although this process will take some time, we can only hope that the trial judge sees through the facade that Beyond Systems put up at trial and issue a ruling that prevents anti-spam litigants from suing under the statutes by merely holding themselves out as service providers where they truly exist to file lawsuits.  Regardless of how the judge rules, the outcome of this case will have ramifications across the country and must be watched, as this is a case of first impression under state anti-spam statutes.

We expect briefing to occur in the next few months and anticipate a ruling later this year.

The case caption is Beyond Systems, Inc. v. Kraft Foods et al., 8:08-cv-00409, United States District Court for the District of Maryland.

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