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NewsletterThe Dispatch June 1998 In this issue:
Supreme Judicial Court Enforces Non-Disclosure Agreement In a significant constitutional law decision, the Massachusetts Supreme Judicial Court has upheld enforcement of an employment related non-disclosure agreement against challenge under the anti-SLAPP statute, G.L.c.23 1, sec. 59H. SLAPP is an acronym referring to "strategic lawsuits against public policy". The anti-SLAPP statute was enacted in 1995 to protect citizen petitioning from retaliatory lawsuits. The protection extends to any statement, testimony, declaration, or complaint before a government agency. Led by Lee Bromberg and Ed Dailey, Bromberg & Sunstein lawyers argued successfully that a lawsuit to enforce the non-disclosure agreement cannot be undercut by the summary dismissal process in the anti-SLAPP statute. Duracraft Corporation v Holmes Products Corporation, (March 25, 1998). The agreement at issue in this lawsuit contains typical confidentiality and non-disclosure provisions for employees who deal with proprietary or privileged information in the workplace. The employee was required to hold all confidential information in strict confidence, to take all precautions necessary to prevent disclosure to third parties, and to disclose information only upon lawful demand. In the event of such a demand, for example, a subpoena, the non-disclosure agreement requires the employee to afford Duracraft an opportunity to review and comment on any information which may be disclosed and to cooperate with Duracraft's efforts to limit confidential and privileged disclosures. In this case, and some 15 months after the employee left Duracraft, he accepted a position with a key competitor, Holmes Products Corporation - at a time when Duracraft and Holmes were engaged in bitter trademark disputes. Shortly thereafter, Holmes noticed the employee's deposition in trademark litigation. On the day of the deposition, Duracraft learned for the first time that its former employee was now employed by Holmes. Over Duracraft's objections, the employee testified to a number of matters which Duracraft regards as confidential, privileged, and proprietary. Duracraft then filed a complaint in the trial court, alleging that the employee had breached his non-disclosure agreement and his fiduciary duties by voluntarily testifying at the deposition, by secretively engaging in discussions with Holmes prior to the deposition, and by failing to take precautions to prevent disclosure of Duracraft's information to Holmes. In response, the employee and Holmes filed special motions to dismiss under the anti- SLAPP statute. Defendants argued that the employee's testimony in the trademark litigation was protected petitioning activity - notwithstanding the non-disclosure agreement. In effect, they argued, the non-disclosure agreement was unenforceable so long as the employee made his disclosures before a government agency. The anti-SLAPP statute, as enacted, contains an unique provision which shifts the burden of proof to the party against which the motion has been filed, here Duracraft. Once the motion to dismiss is filed, the lawsuit will be dismissed unless Duracraft proves that the employee's disclosures are "devoid of any reasonable, factual support or any arguable basis in law". Of course, chose a different course, contending that the statute cannot be applied as a matter of constitutional law to Citing the United States Supreme Court decision in Bill Johnson's Restaurants, Inc. v National Labor Relations Board (1983), Duracraft argued it has a fundamental right to seek enforcement of the non-disclosure agreement under the First Amendment. This right cannot be abridged by the anti-SLAPP statute, and it cannot be applied in a manner that so tips the balance of judicial process in favor of the employee and against Duracraft as to virtually guarantee dismissal of the lawsuit. At the very least, the trial court must consider the legitimacy of the non-disclosure agreement before invoking a summary dismissal process. In its decision, the Supreme Judicial Court agreed with Duracraft. While acknowledging the important protections of the anti-SLAPP statute for petitioning before government agencies, the Court also recognized the employer's protected right to seek enforcement of a legitimate, valid agreement. The Court then ruled that any party claiming protection under the anti-SLAPP statute must make a threshold showing that the claims made against it are based solely on petitioning activity and have no substantial basis other than or in addition to petitioning. Absent that showing, the anti-SLAPP motion to dismiss fails; and the enforcement claim may go forward. In effect, the Supreme Judicial Court's decision restores the balance to what would, otherwise, have been a one-sided process for dismissal of lawsuits. The Duracraft decision continues the anti-SLAPP statute's protection of petitioning activity. At the same time, it does not permit petitioning, even in cases of formal testimony, to be used as a pretext to evade or avoid contracted rights and obligations. Edward J. Dailey Ed Dailey's practice concentrates on strategic business issues and litigation. Intellectual Property Rights and the Global Information Infrastructure: Some Issues to Watch A borderless, Global Information Infrastructure (GII) is emerging. While the ultimate contours of an Information Society are far from apparent, the promise of the GII is evident to all. The GII already includes, for example,both global financial networks and the Internet. It is thus no surprise that committees, task forces, commissions, and councils have been charged with formulating policies with respect to the GII on behalf of national and international bodies in both governmental and non- governmental sectors. The Information Society promises large scale integration of media content across boundaries both of nations and of cultures. Previously, conflicting national laws such as right-side and left-side driving codes could coexist because impassible channels and oceans separated jurisdictions. It is unclear however whether disparities of any analogous sort will be supported on the information highways. There is an emerging consensus, for example, that harmony in the protection of intellectual property rights (IPR) will become a prerequisite for high-quality information content to remain broadly available. But, while the information highways are now accessible to many, the intrinsically territorial nature of copyright and related rights has not changed. One driving force in world harmonization of IPR with regard to digital computer technology and online communications has been the World Intellectual Property Organization (WIPO) Copyright Treaty adopted by a diplomatic conference in Geneva on December 20, 1996. WIPO is an intergovernmental United Nations organization currently encompassing 161 member states. The WIPO Copyright Treaty expands the purview of the Berne Convention for the Protection of Literary and Artistic Works to embrace particular requirements of new technologies within the ambit of traditional copyright concepts. In the U.S., the WIPO Treaty was submitted for Senate ratification on July 28, 1997, and while the U.S. did not accede to the Berne Convention until 102 years after its original signature in 1886, in this case the U.S. is well on its way toward implementation, with bills currently pending in both houses of Congress. Several issues however remain in contention. Yesterday's law is always imperfectly matched to tomorrow's world, yet changes come with difficulty, especially where entire industries rely on the predictability of rights and obligations. While it is widely recognized that the solutions to GII coordination problems, at every level, might range from the adjustment of existing laws to the launching of legislative frameworks based on entirely novel conceptualizations, all considered policy pronouncements have opted for expansion of existing categories. Rationales for the evolutionary option include the argument that the speed of technological change in the media is so insistent that attempts to build fresh regulatory schemes would be futile. It is possible, however, for new law to overcome important conceptual hurdles, especially if changes are couched in familiar terms. An example of change in the guise of traditional concepts is presented by the strides taken by the European Community toward harmonization. The common denominator of copyright laws has always been the "right" (which is to say, the exclusive right) of an author to permit copying of a work, a right which the author may sell or license, for example, to a publisher. On the Web, however, public access might be provided to a licensed copy of a work, thereby effectively "publishing" a work without trammeling the author's exclusive right to copy. In the U. S., the right of making copies available to the public and the right of communicating a work to the public by wire or wireless means are already exclusive rights of the author, subject to certain limitations. In Europe, a proposed European Parliament and Council Directive requires Member States to expand the traditional right of the author to encompass a "right of distribution," including the making of a work, in its original or copy, available to the public through transfer of ownership, as well as a "right of communication to the public," which means allowing members of the public to access a work from an individually chosen place and time. Thus the rights of the content creator would be expanded beyond that of copying, the traditional gravamen of copyright protection. The Council at Ministerial Level of the Organization for Economic Co-operation and Development (OECD, an intergovernmental organization of 29 Member countries, including the U.S., an expanding set of European nations, Canada, Australia, Japan, New Zealand, South Korea and Mexico) has also endorsed this approach on May 26-27, 1997, as have domestic advisory boards. Industry groups, such as the Global Information Infrastructure Commission, have also endorsed an adaptation of current intellectual property laws to meet the needs of the GII, in the recognition that the interests of creators and users of information assets must be balanced in a manner which both encourages availability of high quality content on all media, and also commands widespread compliance. Given the lead taken by intellectual property specialists in addressing international coordination problems of the GII, it is likely that the IPR regime which ultimately prevails will actually shape contours of the Information Society. Consequently, it is important to keep abreast of the current state of deliberations of policy - and law formulating entities the world over as they define the future direction of IPR. Many important issues still elude consensus. One example is compulsory licensing. Some experts propose a collective mechanism for the clearance of rights to material posted on- line, while some industry participants oppose such a system. Database protection is also an area so unsettled as to preclude conclusion of even provisional international agreements Yet, a recognition emerges that modes must be found whereby the GII may both foster the availability of high quality content and safeguard the authenticity of available data and opinion. Samuel J. Petuchowski Sam Petuchowski's practice concentrates on new technologies, their legal protection and their impact on our clients' business. Trademarks and the Internet It may be easy to set up a World Wide Web site on the Internet to begin doing business throughout the country or the world, but it is not so easy to navigate the treacherous legal waters through which a Web site may lead. Internet Web sites can be a cheap and easy way to reach far more potential customers for a product or service than previous forms of advertising, so much so that it seems as if every company with anything to sell - and even some who have nothing to sell - have Web sites touting everything from books, movies and gifts to furniture, automobiles and real estate. Web sites reach an international audience, can be entertaining and interactive, and are easily updated with new material. Indeed, an industry is growing out of selling nothing but advertising for other Web sites. However, many Web sites belong to long established companies who in pre-Internet days relied on other methods for selling and advertising their goods and services. Many of these long-established companies are finding the Web a great new way to do business. Unfortunately, however, using the Web to do business can sometimes lead to some unintended consequences. For example, setting up a Web site may subject a company to suit in a far-off court for trademark infringement or other causes of action. In the past three years, courts have consistently held that companies that actually "do business" over the Internet - take orders, for example - can be sued for trademark infringement in any state where sales have been made. Some courts have gone much further, saying that merely advertising on a Web site can subject a company to a trademark suit in any state, even without any sales. Being hauled into court in a distant state can be burdensome in a number of different ways. First is simply the extra expense of having to defend a lawsuit far away. In addition, there is the disadvantage of having to litigate in an opponent's home town. In the end, however, the biggest problem is for the local business that has well-established trademark rights in its own hometown, but is being sued in another state for trademark infringement in that state by virtue of its Web site. Because the business continued to consider itself "local," despite the international presence of its Web site on the Internet, it is surprised to find itself involved in battle in a city where it had never before done business, fighting over a trademark it thought it owned. To help avoid these problems, we recommend performing at least a nationwide trademark search before setting up a Web site, even if a mark has been used locally for years. A search can highlight any problems likely to arise from use of a trademark on a Web site, and alert one to the risks involved so that one can be ready to deal with potential conflicts. Owners of Web sites also have to be concerned about domain names, linking, framing and metatagging. Domain names are currently registered by Network Solutions, Inc. (NSI) under a government contract.1 Domain name registrations, however, do not confer any trademark rights or insulate one from a trademark infringement suit. Instead, domain name registrations only allow a company to use the domain name as a technical matter. All other rights, including trademark rights, are left to the courts. Thus many companies have registered and begun using domain names only to later find themselves in a battle with another party claiming trademark infringement. This is another area in which a trademark search - which covers domain names - can be helpful in highlighting any risks involved. Another area of concern is linking. Linking is at the heart of the Web - the name "web" alone indicates just how central linking is to modern Internet communication and commerce. But linking has been the source of several fights over trademark and copyright rights, such as where someone links to another's site by using the name - and thus the trademark - of the other party. Some companies have gone so far as to demand that others request permission to link to their sites, while others are concerned only about what they think is "inappropriate" linking, such as linking not to someone else's home page, but to a lower level page on their site in such a way as to make users think they are still at the original site. A related issue is "framing," a special form of linking where someone else's site is "framed" in a Web browser box, in effect showing the contents of another site without leaving the original site. The law is still unsettled in this area, and very few courts have addressed linking and framing. Most courts that deal with the issues of linking and framing focus on a general "fairness" test, asking whether a link or frame confuses consumers regarding source, affiliation or origin, and whether the particular material that is being framed is inappropriately altered. We recommend consulting with an attorney regarding linking and framing before enabling these features on a Web site. "Metatagging" is tagging a word in an "invisible" way so it is readable only by automated Web search engines like Yahoo or Infoseek. The invisible "tag" is meant to make the site show up when users perform Web searches including the "tag" word, thus increasing the visibility of the Web site to the public. There have been several instances where Web sites have included metatags consisting of other companies' famous trademarks - Playboy is one - for the purpose of increasing traffic to their Web site, but without the trademark owners' permission. Courts have found this to be trademark infringement, even though the public does not actually see the offending trademark. To avoid infringing others' trademarks, one should always consult an attorney before using "metatags" on a Web page. Although these issues are the ones currently being seen by clients, attorneys and the courts today, they are certainly not the only ones on the horizon. The explosion of Internet commerce is likely to dramatically increase the number of legal issues arising from Web sites and use of the Internet in general, and to lead to a larger body of better defined legal rules for navigating the Internet. Working closely with an attorney concentrating in this area will enable those engaging in Internet commerce and Web advertising to stay apprised of new developments in this area and avoid potential liability for their Internet-based activities. 1 See Lisa Tittemore's article entitled "Update Regarding New Proposals for the Internet Domain Name Registration System" in this edition of The Dispatch. Kerry Timbers Kerry Timbers' practice concentrates on complex intellectual property litigation and client consultation, including Internet law. Electronic Mail Privacy in the Workplace A common, but incorrect, assumption is that privacy does not apply in the workplace, particularly in the at-will employment environment. In the wake of the United States Supreme Court ratification of broad First Amendment protection of the Internet, however, privacy protections for workers are likely to be extended. ACLU v Reno (1997). Already, Massachusetts recognizes that the privacy act, G.L.c.214, sec. 1B, extends protection to the workplace. See Bratt v. International Business Machines, Corp. (1984); O'Connor v Police Commissioner of Boston (1990); Folmsbee v. Tech Tool Grinding & Supply, Inc.(1994). These cases all apply a balancing test which permits intrusion on an employee's right to privacy only to the extent the employer's countervailing interest legitimately outweighs privacy. When the balancing test is applied to employer monitoring of electronic mail messages, it is likely that Massachusetts employers will be required to offer some legitimate business purpose to overcome the privacy claim. In Restuccia v. Burk Technology, Inc., (Superior Court 1996), the trial court stated as much. There, an employer discharged two employees after intercepting and reading their unflattering e-mail comments about the company's owner. In denying the employer's motion for summary judgment, the court recognized the right of privacy. The ruling stated that privacy can be limited only when there is legitimate purpose and only after the employer has taken reasonable measures to inform employees of the limits of privacy. At the very least, the court suggested, the employer must effectively notify employees that e-mail systems may be monitored and may not be used for personal communications. But see Smyth v. Pillsbury Company (E.D. Penn. 1996) where a federal trial court ruled that employee's expectation of privacy for electronic mail was unreasonable per se. When electronic mail is transmitted on the Internet and involves communications with members of the public beyond the workplace, secretive or unannounced employer surveillance or monitoring is very likely to violate the privacy act or federal and state wiretap laws. It is one thing for an employer to claim the right to surveil, monitor, or copy internal communication; it is quite another for the employer to claim that right when its employees communicate with the public. Here, both employees and the outside public have protected rights to privacy. See the Electronic Communications Privacy Act, 18 U.S.C. secs. 2510 et seq. and the Massachusetts Wiretap Act, G.L.c.272, sec. 99. Indeed, while the Massachusetts law contains an express exception for internal workplace surveillance, any unannounced monitoring of an external communications link, whether by telephone or Internet, is open to challenge as a criminal, wiretap offense. Of course, respect for privacy does not mean employers are powerless to monitor, evaluate, or limit employee use of the Internet. It means simply that privacy must be respected and limited for legitimate business purposes. It means also that employees and the public should be notified of the circumstances under which a company's web sites and e-mail systems may be monitored. Lisa M. Fleming Lisa Fleming's practice concentrates on employment, benefits, and health care issues. Update Regarding New Proposals for the Internet Domain Name Registration System In the United States, Internet domain names are issued by Network Solutions, Inc. (NSI) under a contract granted to NSI by the National Science Foundation (NSF), a United States government agency. Last March, NSF announced that it would no longer supervise the issuance of domain names and would not renew its contract with NSI in the future. (Please note that NSI continues to issue U.S. domain names at this time). It is unclear at this time who or what will replace the NSF/NSI domain name registration system in the United States. At the international level, several proposals for a new international domain name registration system have been made. Implementation of the proposal that has the most current support internationally (known as the IAHC/POC proposal) would likely result in the creation of a restructured domain name system. The IAHC/POC proposal contemplates the creation of seven new "top level domain names" such as ".firm," ".web," ".arts," ".info," ".rec," ".nom" and ".shop" in addition to the already existing top level domain names (i.e., ".com," ".net," ".org," ".gov" and ".edu"). The proposal also would replace the current domain name registration system with one that would be both international and non-governmental. A system consistent with this proposal is already being put into place in Europe. It is currently possible to preregister domain names under this new system with registrars organized by the Internet Council of Registrars ("CORE''). More information regarding this proposal may be obtained on the Internet at www.gtld-mou.org ; more information about the entities qualified to register domain names under this system is available at www.gtld-mou.org/docs/reg-results.html. To implement the IAHC/POC proposal fully, its proponents must obtain U.S. government support, however. Without approval from the United States, the new domain names cannot be universally installed. At this time, it appears unlikely that the United States will sign on to the IAHC/POC proposal. Rather, in January 1998, the U.S. Department of Commerce ("DOC") published an alternate proposal with several important differences. The DOC proposal, like the IAHC/POC proposal, would privatize the Internet domain name registration system. However, under the DOC proposal, the new registration system would be organized under the supervision of a non-profit corporation located in the United States and incorporated under U. S. Law, albeit with a board of directors with members from around the world. The DOC proposal suggests that all of the registration functions that are to be transferred to the new non-profit corporation be transferred slowly to ensure stability of the system - with the final transfer to occur by September 30, 1998. Like the LAHC/POC proposal, the DOC proposal provides for the creation of new top level domain names (five rather than seven) but does not specify what these new top level domain names would be. Also like the IAHC/POC proposal, the DOC proposal proposes opening up the registry function to private entities, as long as those entities meet certain required technical, managerial and site requirements. Although the proponents of the international proposal appear to be pleased with the similarities between the two proposals, many object to the United States as the location of the corporation overseeing registration, viewing this aspect of the proposal as "U.S.-centric." The DOC proposal may be viewed at www.ntia.doc.gov/ntiahome/domainname/dnsdrft.htm. The official version of the DOC proposal was published in the U.S. Federal Register on February 20, 1998. The official deadline for the acceptance of public comments on the DOC proposal was March 23, 1998. It is expected that the DOC will issue its decision on the proposal after review of the public comments which were submitted. We will continue to monitor this situation. We will provide this information in the interest of keeping our clients informed about developments relating to Internet domain name registration generally and in the event that our clients wish to consider preregistering Internet domain names with authorized CORE registrars. Given that the United States is not likely to sign on to the LAHC/POC proposal, we are not making a recommendation regarding preregistration under that system. Lisa M. Tittemore Lisa Tittemore concentrates her practice on litigation and trademark and copyright prosecution in Internet as well as traditional contexts. The Dispatch is not legal advice. For legal assistance or further information, please call the lawyer with whom you regularly deal at our firm or the authors of these articles. |
