Musings on the Phillips vs NetBlue case

I've been taking a random walk through some of the legal documents in the Phillips vs NetBlue case and reading some of the on-line comentary.

For those of you just tuning in, the gist of the case is this: Ritchie Phillips, owner and operator of a small ISP is suing mass marketer NetBlue for spam.

What makes the case interesting is that very little of the spam was sent by NetBlue themselves. Instead, they operate an affiliate program in which other people or companies drive business NetBlue's way and take a cut of the action. NetBlue can then distance themselves from the spam, effectively saying "Hey, not our fault; we told them not to spam." Nudge, nudge, wink, wink.

NetBlue does in fact have an anti-spam policy in writing, but they tend to enforce it very laxly. Choosing, essentially, to wait until a verified complaint comes to them, and then terminating only the affiliate responsible. Evidence in the case suggests that NetBlue in fact only terminates those affiliates who weren't bringing in much money anyway.

NetBlue has been in and out of SpamHaus listings over time, and for a while SpamHaus was working with NetBlue to help them solve their problems. After a while, SpamHaus decided to stop acting as NetBlue's help desk gratis, and to stop playing whack-a-mole. I suspect that they realized that NetBlue had no intention of taking any real action to stop the spam and were simply trying to appease SpamHaus to buy time.

At any rate, this placed Phillips in the position of suing NetBlue not for spam they sent, but for spam that was sent by their agents. This is a trickier case to win, because it means explaining a more complicated system to both judge and jury. It means explaining the mechanism of affiliate spam, redirectors, temporary web sites and so on.

Now there's no doubt that spam was sent, that it probably violated the CAN-SPAM act, and that it was sent on NetBlue's behalf. What remains to be seen is if the dots can be connected clearly enough for the court to see.

NetBlue's court arguments have been very interesting. For example, they've charged that Phillips failed to preserve evidence as is required. In particular, the spams in question often included embedded images and links to redirector pages. Although phillips saved the actual spams themselves, he didn't download the images or capture the contents of the redirector pages. This information would have strengthened the link between NetBlue and the spam.

Phillips responded that requiring an ISP to not only preserve all the spam it received, but to also follow all the links in the spam and preserve copies of the web pages to which it linked would be an impossible burden. In addition, the law only requires that you preserve the evidence you have — which Phililps has done — but does not require that you go out and gather more; it is only necessary to have the evidence sufficient to prove your case. Furthermore, since the images and redirectors were on servers controlled by NetBlue or its affiliates, it is NetBlue which failed to preserve evidence, not Phillips. Finally, Phillips points out that the missing evidence was material which would have helped his case, not NetBlue's.

Anyway, if you'd like to read some of the documentation yourself, it can be found at hypertouch.com. One thing is clear; NetBlue's lawyers intend to fight this and make it expensive for Phillips to pursue.

Other readings:

• Steptoe & Johnson llp: Court Rules that Failure to Mitigate Has No Impact on CAN-SPAM Awards — NetBlue argued that Phillips didn't do enough to mitigate the damage they caused, and the case should be dismissed on those grounds. The court ruled that the doctrine of mitigation of damages does not apply to statutory damages.
• Spam Kings; Spammers Can't Hide Behind Affiliates — Microsoft won a default judgement against Robert Soloway and his company, Newport Internet Marketing. Soloway had tried to redirect the blame to his affiliates. (See also his O'Reilly article.)
• The Inernet Patrol: CAN-SPAM Smack Down for Spammers Hiding Behind Affiliates — more discussionon the McCain ammendment which makes marketers responsible for their affiliate spam.