Inc. v. CompuServe Cubby Inc.

The case applied traditional libel law, originally developed for the printed and broadcast medium, to the Internet for the first time. The court extended protections traditionally held by information distributors, such as newsstands and bookstores, to the newly emerging industry of internet providers. As a result, the court extended First Amendment rights to Internet publishers and set 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 the U.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 passes through 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 libel could 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 existed on 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 and offered 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 `through some 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. The key 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 CompuServe that the company was not a republisher, but rather a distributor. A distributor, such as a library, bookseller, or news vendor, holds different rights and responsibilities than a publisher or republisher. In Lerman v. Chuckleberry Publishing (1981), Leisure noted that, "New York courts have long held that 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 markedly increased the speed with which information is gathered and processed; it is now possible for an individual with a personal computer, modem, and telephone line 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 carry a 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 in Smith 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 a public library, book store, or newsstand would impose an undue burden on the free flow of information.

Because of all these factors, the court dismissed the charges in a summary judgment.