ENIGMA SOFTWARE GROUP USA, LLC, Plaintiff-Appellant, v. MALWAREBYTES, INC., Defendant-Appellee.
No. 17-17351
United States Court of Appeals, Ninth Circuit
September 12, 2019
D.C. No. 5:17-cv-02915-EJD
OPINION
Appeal from the United States District Court for the Northern District of California Edward J. Davila, District Judge, Presiding
Argued and Submitted February 15, 2019 San Francisco, California
Filed September 12, 2019
Before: Mary M. Schroeder and Johnnie B. Rawlinson, Circuit Judges, and Robert S. Lasnik,* District Judge.
Opinion by Judge Schroeder; Dissent by Judge Rawlinson
Communications Decency Act
The panel reversed the district court‘s dismissal, as barred by
Enigma Software Group USA, LLC, and Malwarebytes, Inc., were providers of software that helped internet users to filter unwanted content from their computers. Enigma alleged that Malwarebytes configured its software to block users from accessing Enigma‘s software in order to divert Enigma‘s customers.
Section 230 immunizes software providers from liability for actions taken to help users block certain types of unwanted online material, including material that is of a violent or sexual nature or is “otherwise objectionable.” Distinguishing Zango, Inc. v. Kaspersky Lab, Inc., 568 F.3d 1169 (9th Cir. 2009), the panel held that the phrase “otherwise objectionable” does not include software that the provider finds objectionable for anticompetitive reasons. As to the state-law claims, the panel held that Enigma‘s allegations of anticompetitive animus were sufficient to withstand dismissal. As to the federal claim, the panel further held that
Dissenting, Judge Rawlinson wrote that
Terry Budd (argued), Budd Law PLLC, Wexford, Pennsylvania; Christopher M. Verdini and Anna Shabalov, K&L Gates LLP, Pittsburgh, Pennsylvania; Edward P. Sangster, K&L Gates LLP, San Francisco, California; for Plaintiff-Appellant.
Tyler G. Newby (argued), Guinevere L. Jobson, and Sapna Mehta, Fenwick & West LLP, San Francisco, California, for Defendant-Appellee.
OPINION
SCHROEDER, Circuit Judge:
OVERVIEW
This dispute concerns
The parties to this dispute are both providers of software that help internet users filter unwanted content from their computers. Plaintiff-Appellant Enigma Software Group USA, LLC has alleged violations of New York state law and a violation of the Lanham Act‘s false advertising provision. Each claim is based on the allegation that defendant, Malwarebytes Inc., has configured its software to block users from accessing Enigma‘s software in order to divert Enigma‘s customers. The district court, relying on Zango, dismissed the action as barred by
This case differs from Zango in that here the parties are competitors. In this appeal Enigma contends that the “otherwise objectionable” catchall is not broad enough to encompass a provider‘s objection to a rival‘s software in order to suppress competition. Enigma points to Judge Fisher‘s concurrence in Zango warning against an overly expansive interpretation of the provision that could lead to anticompetitive results. We heed that warning and reverse the district court‘s decision that read Zango to require such an interpretation. We hold that the phrase “otherwise objectionable” does not include software that the provider finds objectionable for anticompetitive reasons.
Enigma‘s federal claim warrants an additional analytical step. The CDA‘s immunity provision contains an exception for intellectual property claims, stating that “[n]othing in this section shall be construed to limit or expand any law pertaining to intellectual property.”
Although it is true that the Lanham Act itself deals with intellectual property, i.e. trademarks, Enigma‘s false advertising claim does not relate to trademarks or any other type of intellectual property. The district court therefore correctly held that the intellectual property exception to immunity does not apply to the false advertising claim. The district court went on to hold that under Zango‘s application of
This appeal centers on the immunity provision contained in
The corollary of this rule, as later articulated by a New York state trial court, was that once a service provider undertook to filter offensive content from its network, it assumed responsibility for any offensive content it failed to filter, even if it lacked knowledge of the content. See Stratton Oakmont, Inc. v. Prodigy Services Co., 1995 WL 323710, *5 (N.Y. Sup. Ct. May 24, 1995) (“Prodigy‘s conscious choice, to gain the benefits of editorial control, has opened it up to a greater liability than CompuServe and other computer networks that make no such choice.“), superseded by statute,
The Stratton Oakmont decision, along with the increasing public concern about pornography on the internet, served as catalysts for legislators to consider greater internet regulation. Congress considered, in early 1995, two different amendments to the Telecommunications Act. The first, called the Exon-Coats amendment, targeted pornography at the source by prohibiting its dissemination. See id. at 16,068. Proponents of this bill argued that parents lacked the technological sophistication needed to implement online-filtration tools and that the government therefore needed to step in. Id. at 16,099. The second proposal, entitled the Online Family Empowerment Act (“OFEA“), targeted internet pornography at the receiving end by encouraging further development of filtration tools. Id. at 22,044. Proponents of this bill pointed out that prohibiting pornography at the source raised constitutional issues involving prior restraint, and argued that parents, not government bureaucrats, were better positioned to protect their children from offensive online material. Id. at 16,013.
On February 1, 1996, Congress enacted both approaches as part of the CDA. The Exon-Coats amendment was codified at
The history of
This court has decided one prior case where we considered the scope of
FACTUAL BACKGROUND
Plaintiff-appellant Enigma Software Group USA, LLC, is a Florida company that sells computer security software nationwide. Malwarebytes Inc., a Delaware corporation headquartered in California, also sells computer security software nationwide. Malwarebytes and Enigma are therefore direct competitors.
Providers of computer security software help users identify and block malicious or threatening software, termed malware, from their computers. Each provider generates its own criteria to determine what software might threaten users. Defendant Malwarebytes programs its software to search for what it calls Potentially Unwanted Programs (“PUPs“). PUPs include, for example, what Malwarebytes describes as software that contains “obtrusive, misleading, or deceptive advertisements, branding or search practices.” Once Malwarebytes‘s security software is purchased and installed on a user‘s computer, it scans for PUPs, and according to Enigma‘s complaint, if the user tries to download a program that Malwarebytes has determined to be a PUP, a pop-up alert warns the user of a security risk and advises the user to stop the download and block the potentially threatening content.
After the revision, Malwarebytes‘s software immediately began flagging Enigma‘s most popular programs—RegHunter and SpyHunter—as PUPs. Thereafter, anytime a user with Malwarebytes‘s software tried to download those Enigma programs, the user was alerted of a security risk and, according to Enigma‘s complaint, the download was prohibited, i.e. Malwarebytes “quarantined” the programs. Enigma alleges that Malwarebytes‘s new definition of a PUP includes subjective criteria that Malwarebytes has “implemented at its own malicious whim” in order to identify Enigma‘s programs as threats. Enigma characterizes the revision as a “guise” for anticompetitive conduct, and alleges that its programs are “legitimate“, “highly regarded“, and “pose no security threat.” As a result of Malwarebytes‘s actions, Enigma claims that it has lost customers and revenue and experienced harm to its reputation.
Enigma brought this action against Malwarebytes in early 2017, in the Southern District of New York. Enigma claimed that Malwarebytes has used its PUP-modification process to advance a “bad faith campaign of unfair competition” aimed at “deceiving consumers and interfering with [Enigma‘s] customer relationships.”
Malwarebytes sought a change of venue. Although Enigma maintained that venue was proper in New York because Malwarebytes‘s conduct affected users and computers within that state, the conduct at issue had national reach. The district court therefore granted Malwarebytes‘s motion to transfer the case to the Northern District of California, where Malwarebytes is headquartered.
Malwarebytes then moved to dismiss for failure to state a claim, arguing that it was immune from liability under
On appeal, Enigma primarily contends that the district court erred in interpreting our Zango opinion to give online service providers unlimited discretion to block online content, and that the Good Samaritan blocking provision does not provide such sweeping immunity that it encompasses anticompetitive conduct.
DISCUSSION
I. Scope of § 230(c)(2) Immunity as Applied to State-Law Claims
The district court held that our opinion in Zango controlled, and interpreted Zango to mean that an online-service provider cannot be liable for blocking internet users from accessing online content that the provider considers objectionable, regardless of the provider‘s motivations or the
The majority in Zango did not, however, address whether there were limitations on a provider‘s discretion to declare online content “objectionable.” No such issue was raised in the appeal. We noted that Zango “waived” the argument that its software was not “objectionable.” See id. at 1176-77. We therefore held that
It was Judge Fisher‘s concurring opinion in Zango that framed the issue for future litigation as to whether the term “objectionable” might be construed in a way that would immunize providers even if they blocked online content for improper reasons. See id. at 1178-80 (Fisher, J. concurring). Judge Fisher warned that extending immunity beyond the facts of that case could “pose serious problems,” particularly
District courts nationwide have grappled with the issues discussed in Zango‘s majority and concurring opinions, and have reached differing results. Like the district court in this case, at least two other federal district courts have relied on Zango to dismiss software-provider lawsuits against Malwarebytes where the plaintiff claimed that Malwarebytes improperly characterized the plaintiff‘s software as a PUP. See PC Drivers Headquarters, LP v. Malwarebytes Inc., 371 F. Supp. 3d 652 (N.D. Cal. 2019); PC Drivers Headquarters, LP v. Malwarebytes, Inc., No. 1:18-CV-234-RP, 2018 WL 2996897, at *1 (W.D. Tex. Apr. 23, 2018).
Other district courts have viewed our holding in Zango to be less expansive. See Song fi Inc. v. Google, Inc., 108 F. Supp. 3d 876, 884 (N.D. Cal. 2015) (noting that just because “the statute requires the user or service provider to subjectively believe the blocked or screened material is objectionable does not mean anything or everything YouTube finds subjectively objectionable is within the scope of Section 230(c),” and concluding that, “[o]n the contrary such an ‘unbounded’ reading . . . would enable content providers to ‘block content for anticompetitive reasons[.]‘“) (quoting Judge Fisher‘s concurrence in Zango); Sherman v. Yahoo! Inc., 997 F. Supp. 2d 1129, 1138 (S.D. Cal. 2014) (same); see also Holomaxx Techs. v. Microsoft Corp., 783 F. Supp. 2d 1097, 1104 (N.D. Cal. Mar. 11, 2011) (acknowledging that a provider‘s subjective determination of what constitutes
We find these decisions recognizing limitations in the scope of immunity to be persuasive. The courts interpreting Zango as providing unlimited immunity seem to us to have stretched our opinion in Zango too far. This is because the focus of that appeal was neither what type of material may be blocked, nor why it may be blocked, but rather who benefits from
As relevant here, the majority opinion in Zango establishes only that Malwarebytes, as a filtering-software provider, is an entity to which the immunity afforded by
The legal question before us is whether
In this appeal, Enigma alleges that Malwarebytes blocked Enigma‘s programs for anticompetitive reasons, not because the programs’ content was objectionable within the meaning of
We cannot accept Malwarebytes‘s position, as it appears contrary to CDA‘s history and purpose. Congress expressly provided that the CDA aims “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services” and to “remove disincentives for the development and utilization of blocking and filtering technologies.”
In the infancy of the internet, the unwillingness of Congress to spell out the meaning of “otherwise objectionable” was understandable. The broad grant of protective control over online content may have been more readily acceptable in an era before the potential magnitude of internet communication was fully comprehended. Indeed, the fears of harmful content at the time led Congress to enact, in the same statute, an outright ban on the dissemination of
We must today recognize that interpreting the statute to give providers unbridled discretion to block online content would, as Judge Fisher warned, enable and potentially motivate internet-service providers to act for their own, and not the public, benefit. See Zango, 568 F.3d at 1178 (Fisher, J., concurring). Immunity for filtering practices aimed at suppressing competition, rather than protecting internet users, would lessen user control over what information they receive, contrary to Congress‘s stated policy. See
We therefore reject Malwarebytes‘s position that
Enigma relies on the principle of ejusdem generis, which teaches that when a generic term follows specific terms, the generic term should be construed to reference subjects akin to those with the specific enumeration. See, e.g., Norfolk & W. Ry. Co. v. Am. Train Dispatchers Ass‘n, 499 U.S. 117, 129 (1991). But the specific categories listed in
We think that the catchall was more likely intended to encapsulate forms of unwanted online content that Congress could not identify in the 1990s. But even if ejusdem generis did apply, it would not support Enigma‘s narrow interpretation of “otherwise objectionable.” Congress wanted to give internet users tools to avoid not only violent or sexually explicit materials, but also harassing materials. Spam, malware and adware could fairly be placed close enough to harassing materials to at least be called “otherwise objectionable” while still being faithful to the principle of ejusdem generis. Several district courts have, for example, regarded unsolicited marketing emails as “objectionable.” See, e.g., Holomaxx, 783 F. Supp. 2d at 1104; e360Insight, LLC v. Comcast Corp., 546 F. Supp. 2d 605, 608-610 (N.D. Ill. 2008); see also Smith v. Trusted Universal Standards In Elec. Transactions, Inc., No. CIV09-4567-RBK-KMW, 2010 WL 1799456, at *6 (D.N.J. May 4, 2010). But we do not, in
Malwarebytes‘s fallback position is that, even if it would lack immunity for anticompetitive blocking, Malwarebytes has found Enigma‘s programs “objectionable” for legitimate reasons based on the programs’ content. Malwarebytes asserts that Enigma‘s programs, SpyHunter and RegHunter, use “deceptive tactics” to scare users into believing that they have to download Enigma‘s programs to prevent their computers from being infected. Enigma alleges, however, that its programs “pose no security threat” and that Malwarebytes‘s justification for blocking these “legitimate” and “highly regarded” programs was a guise for anticompetitive animus.
The district court interpreted our holding in Zango to foreclose this debate entirely, implicitly reasoning that if Malwarebytes has sole discretion to select what programs are “objectionable,” the court need not evaluate the reasons for the designation. Because we hold that
Enigma‘s fourth claim is a claim for false advertising under the Lanham Act, a statute dealing with a form of intellectual property, i.e. trademarks. Enigma alleges that Malwarebytes publicly mischaracterized Enigma‘s programs SpyHunter and RegHunter as potentially unwanted or PUPs, and it did so in order to interfere with Enigma‘s customer base and divert those customers to Malwarebytes.
Section 230(e)(2) of the CDA contains an exception to immunity for intellectual property claims. See
This is because even though the Lanham Act is known as the federal trademark statute, not all claims brought under the statute involve trademarks. The Act contains two parts, one governing trademark infringement and another governing false designations of origin, false descriptions, and dilution. Compare
In this appeal, we must decide whether the exception to immunity contained in
We have observed before that because Congress did not define the term “intellectual property law,” it should be construed narrowly to advance the CDA‘s express policy of providing broad immunity. See Perfect 10, 488 F.3d at 1119. One of these express policy reasons for providing immunity was, as Congress stated in
We therefore hold that the intellectual property exception contained in
Here, Enigma‘s Lanham Act claim derives from the statute‘s false advertising provision. Enigma alleges that Malwarebytes mischaracterized Enigma‘s most popular software programs in order to divert Enigma‘s customers to Malwarebytes. These allegations do not relate to or involve trademark rights or any other intellectual property rights. Thus, Enigma‘s false advertising claim is not a claim “pertaining to intellectual property law” within the meaning of
The district court went on to hold, however, as it did with the state law claims, that Malwarebytes is nevertheless immune from liability under our decision in Zango. As we have explained with respect to the state law claims, Zango did
CONCLUSION
The judgment of the district court is reversed and the case is remanded for further proceedings consistent with this opinion.
REVERSED and REMANDED.
RAWLINSON, Circuit Judge, dissenting:
In his concurring opinion in Zango, Inc. v. Kaspersky Lab, Inc., 568 F.3d 1169, 1179-80 (9th Cir. 2009), Judge Fisher acknowledged that “until Congress clarifies the statute or a future litigant makes the case for a possible limitation,” the “broadly worded” Communications Decency Act (the Act) afforded immunity to a distributor of Internet security software. Congress has not further clarified the statute and Enigma Software has not persuasively made a case for limitation of the statute beyond its provisions.
The majority opinion seeks to limit the statute based on the fact that the parties are competitors. See Majority Opinion, p. 4. However, nothing in the statutory provisions or our majority opinion in Zango supports such a distinction.
In particular, the majority holds that the criteria for blocking online material may not be based on the identity of the entity that produced it. See Majority Opinion, p. 10. Unfortunately, however, that conclusion cannot be squared with the broad language of the Act. Under the language of the statute, if the blocked content is “otherwise objectionable” to the provider, the Act bestows immunity. Zango, 568 F.3d at 1173 (“[T]he statute plainly immunizes from suit a provider of interactive computer services that makes available software that filters or screens material that the user or the provider deems objectionable.“) (emphasis in the original); 1174 (“According protection to providers of programs that filter adware and malware is also consistent with the Congressional goals for immunity articulated in [
I respectfully dissent.
Notes
“No provider or user of an interactive computer service shall be held liable on account of -
(A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or
(B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph [A].”