Inc. v. CompuServe Cubby Inc.

Plaintiff
Cubby, Inc., and Richard G. Blanchard
Defendant
CompuServe Inc.
Plaintiff's Claim
That CompuServe was liable for defamatory statements published in the newsletter, Rumorville, against rival newsletter, Skuttlebut.
Chief Lawyer for Plaintiff
Leo Kayser
Chief Defense Lawyer
Leslie Mullady
Judge
Peter K. Leisure
Place
New York, New York
Date of Decision
29 October 1991
Decision
The court ruled in favor of CompuServe finding that the Internet service provider was not liable for the statements printed in the newsletter transmittedthrough its system.
Significance
The case applied traditional libel law, originally developed for the printedand broadcast medium, to the Internet for the first time. The court extendedprotections traditionally held by information distributors, such as newsstands and bookstores, to the newly emerging industry of internet providers. As aresult, the court extended First Amendment rights to Internet publishers andset a precedent for the regulation of Internet activity.
American courts have long recognized the First Amendment protections of the free flow of speech as they relate to the distributors of information. As theU.S. Supreme Court made clear in Smith v. California (1959), requirements for distributors, such as book sellers or news vendors, to know the contents of every material they sell would place an undue burden on distributors,and an impediment to the free flow of speech. The emergence of online computer service companies by the 1990s, including CompuServe, America Online, and Prodigy, and thousands of electronic bulletin board operators using the service companies created new forms of tort liability ranging from defamation to trademark and copyright issues. The Internet services provide online general information, or electronic library, available to subscribers who pay a membership fee. Included are thousands of information sources including special-interest bulletin boards, interactive online "chat rooms," and databases on various topics. Unlike electronic mail (e-mail) that is usually directed to specific addresses, bulletin boards and newsgroups can reach a much larger audience.The providers exert various levels of control over the material that passesthrough their systems, from none to some filtering.
Liability has historically grown as communications technology grew. The Internet not only greatly altered how individuals communicated, but also how libelcould occur due to its broad reach and the anonymous nature of many participants. As a result, the nation's insurance market scrambled to develop policies for online service providers and other entities operating on the Internet to financially protect them from defamation, invasion of privacy, and copyright infringement claims. The record of case law and legislation concerning cyberspace was still young at the inception of the 1990s. Little guidance existedon how much knowledge and editorial control by a provider was needed to establish liability.
CompuServe of Columbus, Ohio offered, as one of its many computer services, access to CompuServe Information Service (CIS) which provided thousands of information sources for subscribers. Within CIS, subscribers could access the Journalism Forum, and within this Forum was the newsletter Rumorville, which contained information about broadcast journalism and journalists. The Journalism Forum was produced for CompuServe by Cameron Communications, Inc. (CCI). CCI in turn contracted with Don Fitzpatrick Associates (DFA) to create the newsletter Rumorville, which was loaded into CIS as part of the Journalism Forum and made immediately available to CIS subscribers.
With the intent to compete with Rumorville, Cubby, Inc. developed andoffered Skuttlebut, a subscription newsletter which also contained information about television and radio journalism. Rumorville soon published remarks, including "a suggestion that the individuals at Skuttlebut gained access to information first published by Rumorville `throughsome back door' . . . and a description of Skuttlebut as a `new start-up scam.'" Rumorville also published a statement that the creator of Skuttlebut, Robert Blanchard, was "`bounced' from his previous employer, WABC." Based on these statements, Cubby accused CompuServe of libel, business disparagement, and unfair competition.
In defense, CompuServe chose not to address the allegedly defamatory nature of the statements but rather CompuServe's liability for those statements. Thekey issue became CompuServe's relation to Rumorville.
Cubby claimed that CompuServe acted as a "republisher" of the defamatory statements. In Cianci v. New Times Publishing (1980), the responsibility of the republisher was defined as, "One who repeats or otherwise republishes defamatory matter is subject to liability as if he had originally published it." But Judge Peter K. Leisure, writing for the court, agreed with CompuServethat the company was not a republisher, but rather a distributor. A distributor, such as a library, bookseller, or news vendor, holds different rights andresponsibilities than a publisher or republisher. In Lerman v. Chuckleberry Publishing (1981), Leisure noted that, "New York courts have long heldthat vendors and distributors of defamatory publications are not liable if they neither know nor have reason to know of the defamation." Leisure considered CIS to be a resource for many different information sources, hence a distributor of those sources. In a sense, CIS was an electronic library. Because Cubby did not claim that CompuServe had knowledge of the defamatory statements, and CompuServe did not review the information before it was posted in the Journalism Forum, the company could also not be held liable as a distributor.
Leisure explained,

CompuServe and companies like it are at the forefront of the information industry revolution. High technology has markedlyincreased the speed with which information is gathered and processed; it is now possible for an individual with a personal computer, modem, and telephoneline to have instantaneous access to thousands of news publications from across the United States and around the world. While CompuServe may decline to carry a given publication altogether, in reality, once it does decide to carrya publication, it will have little or no editorial control over that publication as part of a forum that is managed by a company unrelated to CompuServe.

Leisure extended those First Amendment protections previously established inSmith v. California to Internet information providers by writing,

Technology is rapidly transforming the information industry. A computerized database is the functional equivalent of a more traditional news vendor, and the inconsistent application of a lower standard of liability to the electronic news distributor such as CompuServe than that which is applied to apublic library, book store, or newsstand would impose an undue burden on thefree flow of information.

Because of all these factors, the court dismissed the charges in a summary judgment.
Impact
The Cubby case highlighted the beginning struggle by the courts to assess accountability for illegal conduct on the Internet. The Cubby decision strengthened the legitimacy of online servers as publishers and distributors of information. The decision better defined the roles of on-line services, and extended to these services the same First Amendment protections enjoyed by other forms of journalism and expression.
In determining whether CompuServe was like a publisher or a common carrier, like telephone companies, the court determined the latter. However, Internet libel law was still in its infancy as the 1990s progressed. Surprisingly, thenumber of Internet libel cases did not skyrocket through the 1990s as some anticipated.
As the electronic media market grew, still more definition of liability and on-line libel was needed. In the case of Stratton Oakmont v. Prodigy Services Co. (1995), the New York Supreme Court found that Prodigy was liable for statements published on a bulletin board it supported. Critics charged that the courts in essence rewarded companies, such as CompuServe in the Cubby case, who exert little control over the material they transmit by greatly limiting their liability for the nature of material transmitted. Whereas,a server such as Prodigy is charged with much greater liability because theyattempted to screen materials submitted for transmittal.
Quickly, Congress passed the 1996 act to regulate the material transmitted onthe Internet and limit the liability of service providers such as CompuServeand Prodigy. The Supreme Court in Reno v. American Civil Liberties Union (1997) struck down parts of the law regulating Internet content on FirstAmendment freedom of speech grounds, but the section of the law addressing server liability remained valid. The courts in Zeran v. America Online (1997) provided an even broader interpretation of the immunity to prosecutionthat the service providers hold. Additional questions of Internet service provider liability for libel arose in 1997 when White House aide Sidney Blumenthal field suit against America Online and a columnist employed by AOL, Matt Drudge. The courts dismissed AOL from the suit based on immunity from the Communications Decency Act and Drudge claimed constitutional protection, which journalists have in reporting on public figures.
A wide range of defamation and other liability issues continued to confront online service providers and their users through the 1990s. Strong interest over legislatively regulating the Internet and protecting innocent individualsfrom defamation continued as the decade came to a close.
Related Cases

• Smith v. California, 361 U.S. 147 (1959).
  
• Cianci v. New Times Publishing Co., 639 F 2d 54 (1980).
  
• Lerman v. Chuckleberry Publishing, Inc., 521 F.Supp. 228 S.D.N.Y.(1981).
  
• Statton Oakmont, Inc. v. Prodigy Services, Co., WL 323710 N.Y.S.C.(1995).
  
• Zeran v. America Online, Inc., 129 F.3d 327 (1997).

Regulation of the Internet
The Internet, a powerful, new, unregulated, electronic communication medium,grew rapidly in the 1990s. By 1995, 24 million people subscribed to Internetproviders. Internet technology allows worldwide transmission of written textand digitized images. Concerns over what was transmitted across the net escalated. The related debate focused on creating controls versus freedom of ideas.
Pornography is one major concern. Regulation proponents contend distributionof obscene or indecent material to children must be halted. Civil libertarians counter with a defense of freedom of speech and ideas. Furthermore, attempts at regulation usually restrict more than intended.
Some maintain online providers must review all material posted on the Internet. Opponents argue that it is unreasonable for providers to be held libel foreverything that flows though their hardware.
Another issue is "content filtering." Filtering allows individuals to block out material. Proponents advocate the ability to block out at the receiving end. Opponents say that not only individuals but employers, organizations, andeven entire service providers could block out materials, causing obtrusive barriers in freewheeling Internet communication.
Sources
Marshall, Joshua M. "Will Free Speech Get Tangled in the Net?" The American Prospect, January-February 1998.