by Donna Demac

When the Supreme Court resoundingly rejected the Communications Decency Act in 1997, most people concluded that cyberspace was now a realm of unfettered free speech. There have been some subsequent threats of CDA-like bills from Congress and the promotion of filtering systems by the Clinton Administration. Over the past few years, however, other equally significant challenges to online liberties have come not from government, but rather the private sector.

Corporations have been mounting a growing legal assault against those who use internet bulletin boards and web sites to criticize corporate performance and policies. Concerned at how easy it is for individuals or small groups to spread their opinions online, businesses are turning to the courts to try to silence those who tarnish their good name.


One of the main areas of controversy has been investor chat rooms. Given the national obsession with the stock market, there are huge numbers of individuals who spend time online discussing particular publicly-traded companies. They exchange information, misinformation, rumor, speculation and strongly stated opinions about a company's performance, the competence (or lack thereof) of its management and the prospects for the stock price. There's nothing new about this kind of discussion, but in the past it took place among small groups gathered around water coolers or in backyards. The messages posted on services such as Yahoo Finance, by contrast, can be viewed by thousands or even millions of readers.

While some observers see chat rooms as a great advance in communication, some companies regard it as a threat to their existence–or at least to the well-being of their stock price. They claim that those posting messages and hiding behind anonymous screen names, deliberately spread false and malicious statements intended to harm a company. There's some truth to this: It is all too easy for competitors or disgruntled former employees or short sellers (investors who bet on declines in stock prices) to try to use chat rooms to drive down the price of a stock.

Yet it is just as easy for corporate executives or loyal employees or individual investors to use the same chat rooms to try to pump up the price of a stock. In theory, those chat room participants without ulterior motives will sort through the conflicting claims and arrive at a reasonable conclusion.

Many companies are not willing to put their faith in the reasoning abilities of the average investor. As soon as they see strongly negative postings, they call in the lawyers and file what some call "cybersmear" lawsuits. Typically, their lawyers will serve John Doe subpoenas on internet service providers in an attempt to learn the true identity of anonymous posters. In an article last November, Legal Times reported that Yahoo, America Online, Silicon Investor and other operators of online investor bulletin boards were being served with such subpoenas at a rate of about one a day.

The corporations filing online libel suits are both large and small. Among the plaintiffs have been the military contractor Raytheon Co., the construction firm Stone & Webster Inc., and ProMedCo Management Co., which manages physician practice groups. An article in Business Week last February estimated that more than 100 such suits had been brought around the country. Companies often seek to intimidate the defendants in these cases with huge damage demands. In a suit brought in March,, an electronic commerce firm based in California, asked for at least $60 million in punitive damages in a case against a group of posters in the Raging Bull chat room.

What's also chilling is the ease with which plaintiffs' lawyers have obtained the true identities of anonymous posters as well as other personal information. The Business Week article described a situation in which a company called ITEX Corp. filed a John Doe suit against an online critic in response to postings on a Yahoo message board. Yahoo gave ITEX the poster's internet protocol address, which the company was able to use to locate the poster's internet service provider, which turned out to be CompuServe Inc. In response to a broad subpoena, CompuServe turned over not only the poster's name, but also his credit-card number, the name of his bank and a list of some of his online purchases.

CompuServe, which is owned by America Online, told Business Week that it no longer divulges such information. Some services say that they now warn customers when a subpoena has been filed and give them time to file a challenge. Those online services that fail to do so can find themselves being sued. Recently a man in Ohio sued Yahoo for revealing his identity without warning, saying that the disclosure violated his privacy.

It's difficult to know how successful plaintiffs are in cybersmear suits, since the cases are usually settled quietly. In the ITEX case cited above, the defendant ultimately prevailed. The San Francisco Chronicle reported recently that ITEX lost its appetite for the litigation as its legal fees mounted and it faced demands for documents from lawyers for the defendant. ITEX agreed to pay $5,000 to the defendant and $40,000 to an organization he created to help cybersmear defendants?the John Does Anonymous Foundation?in exchange for a promise not to countersue for malicious prosecution. The foundation will need a lot more money, since there's no sign that cybersmear lawsuits are going to disappear anytime soon.


The other major arena for online free speech critical of corporate conduct involves web pages set up by disgruntled customers of a company. Dubbed "consumer revenge dot com," these sites allow people to vent their frustration at shoddy merchandise, poor service or inflated prices. They are also known as "suck sites," given the popularity of web addresses such as, which presented complaints about Bally Total Fitness Health Clubs. Other examples have included the U-Hell site, devoted to horror stories about U-Haul trailers, and, which included critiques of United Airlines service.

Silencing customer complaints is more difficult than bringing libel suits against anonymous chat room posters, so some companies resort to measures such as buying out the sites or preemptively registering "sucks" domain names so that their critics can't use them.

Nonetheless, some firms can't resist going after their opponents. One of the more notable examples was Terminix International Co., the nation's largest exterminator. Several years ago Carla Virga launched a web site to publicize her complaint that Terminix, a subsidiary of ServiceMaster Co., had botched its inspection of her home in Yuba City, California. In addition to presenting her own unfavorable experience, Virga posted complaints from other dissatisfied Terminix customers who contacted her, and she reported what she learned from state regulators about complaints they had received about the company.

Last October Terminix filed suit in federal court in Tennessee charging Virga with trademark violations, deceptive practices and unfair competition. What Terminix zeroed in on was Virga's practice of including company trademarks in her site's meta tags, codes that are used by search engines in locating web pages on a particular subject. As a result of Virga's meta tags, when internet users searched for references to Terminix using search engines such as Alta Vista or Google, the resulting list would include the official company site as well as hers.

Virga, with the help of pro-bono lawyers including Paul Alan Levy of the Public Citizen Litigation Group, argued that because her web site was not commercial there was no trademark infringement. Probably because of the media attention the case was receiving, Terminix decided in March to drop its lawsuit.

That's encouraging, but as Virga told a reporter, "Somebody else down the road is not going to have the luxury of free legal help that I did. These attorneys can't keep doing pro-bono cases for everybody." She added: "People do have the right to freedom of speech, but they have to protect that."

Amen to that. Online as well as offline, we need to respond aggressively to threats to free speech, whether they come from government or the private sector.

Donna Demac is an NCAC Board Member and an attorney who teaches courses on intellectual property & the First Amendment in a graduate program at Georgetown University. Ms. Demac can be contacted at [email protected].