STEINHART & FALCONER LLP
ROGER R. MYERS (State Bar No. 146164)
LISA M. SITKIN State (Bar No. 194127)
333 Market Street, Suite 3200
San Francisco, California 94105
Telephone: (415) 777-3999
Facsimile: (415) 442-0856
Attorneys for Plaintiff
BUSINESS WIRE
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
BUSINESS WIRE, a California corporation,
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
BUSINESS WIRE, a California corporation,
Plaintiff,
V.
JEFFREY S. MITCHELL, an individual;
WILLIAM ULRICH, an individual; JANICE
SHELL, an individual,
Defendants.
Case No. C 99-1987 CAL
Date: August 20, 1999
Time: 9:30 a.m.
Judge: Charles A. Legge
Court Room: 10
Documents Submitted Herewith:
(1) Decl. of Cathy Baron Tamraz;
(2) Decl. of Neil Bardach;
(3) Decl. of Lauren Kunis;
(4) Decl. of Lisa Sitkin;
(5) Request for Judicial Notice;
(6) Evidentiary Objections
OPPOSITION OF PLAINTIFF BUSINESS WIRE TO DEFENDANTS' SPECIAL MOTION TO
STRIKE ON THE THRESHOLD ISSUE OF WHETHER CALIFORNIA CODE OF CIVIL
PROCEDURE 425.16 APPLIES TO PLAINTIFF'S CAUSES OF ACTION
TABLE OF CONTENTS
PAGE(S)
INTRODUCTION ............................................... 1
BACKGROUND ................................................. 2
I. BUSINESS WIRE'S FEDERAL TRADEMARK CLAIMS ARE NOT
SUBJECT TO A MOTION TO STRIKE UNDER CALIFORNIA CODE OF CIVIL
PROCEDURE ' 425.16 BECAUSE FEDERAL CLAIMS BROUGHT
IN FEDERAL COURT ARE GOVERNED EXCLUSIVELY BY
FEDERAL -- NOT STATE -- LAW ................................ 4
II. BUSINESS WIRE'S CLAIMS ALSO ARE NOT SUBJECT TO CALIFORNIA
CODE OF CIVIL PROCEDURE ' 425.16 BECAUSE THEY DO NOT
ARISE OUT OF DEFENDANTS' SPEECH IN A PUBLIC FORUM
ON A PUBLIC ISSUE ......................................... 8
A. Code Of Civil Procedure ' 425.16 Does Not Apply To Fraud
Or Contract Claims Based On Misrepresentations By A Party
To The Formation Of A Contract ............................ 10
B. Code Of Civil Procedure ' 425.16 Does Not Apply To
Trademark Dilution And Related Acts That Did Not Address
A Matter Of Public Interest In A Public Forum ................... 13
1. A Privately Controlled Area Where The Public Does
Not Have General Access To Speak, Such As Defendants'
Website And Business Wire's Distribution Service,
Is Not A Public Forum .............................. 14
2. Defendants' Subsequent Speech On A Matter Of Public
Interest Cannot Be Used To Fit Trademark Infringement
And Unfair Competition Under ' 425.16 Where, As Here,
The Wrongful Acts Did Not Themselves Involve
Speech On That Subject ............................ 15
CONCLUSION ................................................ 18
TABLE OF AUTHORITIES PAGE(S)
FEDERAL CASES
Ackerman v. Western Electric Co.,
643 F. Supp. 836 (N.D. Cal. 1986),
afl'd, 860 F.2d 1514 (9th Cir. 1988) ..................... 6, 8
Chicago Jt...Board v. Chicago Tribune Co.,
435 F.2d 470 (7th Cir. 1970) .................................. 14
Cohen v. Cowles Media Co., 501 U.S. 663
(1991) ........................ 10, 12
Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd.,
604 F.2d 200 (2d Cir. 1979) .................................. 18
Dallas CowboYs Cheerleaders, Inc. v. Scoreboard Posters. Inc.,
600 F.2d 1184 (5th Cir_ 1979) ................................ 18
Erie R. Co. v. Tompkins, 304 U.S. 64
(1938) .............................. 6
Hanna v. Plumcr, 380 U.S. 460 (1965) ........................... 5-8
International Order of Job's Daughters v. Lindeburg & Co.,
633 F.2d 912 (9th Cir. 1980) ................................. 1, 5-7
Loving v. Boren, 956 F. Supp. 953 (W.D. Okla. 1997),
aff'd,, 133 F.3d 771 (10th Cir. 1998) .......................... 15
Maternally Yours v. Your Maternity Shop,
234 F.2d 538 (2d Cir. 1956) ................................. 1, 5-7
Mendes v, New England Duplicating Co.,
94 F. Supp. 558 (D. Mass. 1950),
afl'd, 190 F.2d 415 (lst Cir. 1951) ............................. 5
Muir v. Alabama Educ. Television Comm'n,
688 F.2d 1033 (Sth Cir. 1982) (eh bane) .......................... 14
Robertson v. Wegmann,
436 U.S. 584 (1978) .......................................... 8
San Antonio CommnniW Hosp. v. Southern California Dist. Council of
Carpenters, 125 F.3d 1230 (9th Cir. 1997) ................... 12
Schenck v. United States, 249 U-S- 47 (1919) ................ 2-4, 17
Solg Electric Co. v. Jefferson Electric Co.,
317 U.S. 173 (1942) ....................................... 1, 5-7
United States ex rel. Newsham v. Lockheed Missiles & Space Co.,
171 F.3d 1208 (9th Cir. 1999) ........................... 6, 7
United States v., Douglas,
579 F.2d 545 (9th Cir. 1978) ................................ 14
Nalt Disney Productions v. Air Pirates,
581 F_2d 751 (9th Cir. 1978) ................................... 18
STATE CASES
Bradbury.v. Superior Court,
49 Cal. App. 4th 1108 (1996) ........................ 7, 8, I0-13, 18
Braun v. Chronicle Pub. Co.,
52 Cal. App. 4th 1036 (1997) ................................. 9
Briggs v. Eden Council for Hope and Opportunity,
19 Cal. 4th 1106 (1999) ................................... 9, 10,12
Lafayette Morehouse, Inc. v. Chronicl.e....pub. Co.,
37 Cal. App. 4th 855 (1995) ............................. 4,10,13,15
Chavez v. Kea[, 34 Cal. App. 4th 1406 (1995) ..................... 8
Ericsson GE. Mobile Comm. inc. v. C.S.I. Telecomm. Eng'rs,
49 Cal. App. 4th 1591 (1996) ................................ 9
Prisoners Union v. Department of Corrections,
135 Cal. App. 3d 930 (1982) ................................... 14
Wilcox v. Superior Court, 27 Cal. App. 4th 809
(1994) ........................... Passim
Zhao v. Wong, 48 Cal. App. 4th 1114 (1996) ................. 10,13-15
STATUTES AND RULES
Cal. Code of Civ. Proc. 425.16 .............................. Passim
15 U.S.C.A. '' 1051-1127 ........................................ 5
28 U.S.C. '' 2071-2074 .......................................... 5, 8
42 U.S.C. ' 1988 ................................................ 8
Fed. R. Civ. Pro. 1 ............................................. 5, 8
INTRODUCTION
After deliberately deceiving plaintiff Business Wire and misusing its
trademark to give credibility and visibility to their Internet invest-
ment hoax, defendants now seek to recast their unlawful acts as speech
on a matter of public interest -- even though their conduct giving
rise to this lawsuit had no reference to that subject and even though
their comments in unveiling the hoax touted their cleverness and
advertised their business, but did not discuss the matter of public
interest they now claim to be advancing. Defendants advocate this
tortured leap of logic in an attempt to bring Business Wire's causes
of action for federal and state trademark infringement, unfair compe-
tition, fraud, breach of contract and related claims under the protec-
tive scope of California's anti-SLAPP statute, Code of Civil Procedure
' 425.16.
California's anti-SLAPP statute was never intended to protect such
conduct. To begin with, California law cannot be applied in federal
court to Business Wire's federal causes of action for trademark in-
fringement in violation of the federal Lanham Act. Maternally Yours v.
Your Maternity Shop, 234 F.2d 538,540 n.1 (2d Cir. 1956) ("federal law
govern[s] infringement of federally-registered trade-marks .... ");
accord Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173, 176
(1942); International Order of Job's Daughters v. Lindeburg & Co., 633
F.2d 912,915-17 (gth Cir. 1980) (federal law applies to Lanham Act
claim).
Moreover, "section 425.16 does not apply in every case where the
defendant may be able to raise a First Amendment defense to a cause of
action. Rather, it is limited to exposing and dismissing SLAPP suits
-- lawsuits 'brought primarily to chill the valid exercise of the
constitutional rights of freedom of speech and petition for the re-
dress of grievances' 'in connection with a public issue.'"
Wilcox....v.. Superior Court, 27 Cal. App. 4th 809, 819 (1994) (quot-
ing statute). It follows that ' 425.16 does not apply to unlawful
conduct for which there is no First Amendment defense and which is not
speech on a public issue but defendants now claim was intended to
bring attention to a matter of public interest. Id. at 820-21.
Put another way, defendants cannot shout "fire" in a crowded theater
and then attempt to invoke ' 425.16 in defense to lawsuits by injured
patrons by claiming the tortious exclamation was intended to illus-
trate a matter of public interest such as the lack of adequate fire
exits. See Schenck v_ U.njted States, 249 U.S. 47, 52 (1919). Yet that
is exactly what defendants are attempting. They should not be allowed
to succeed.
BACKGROUND
In March 1999, defendants planned a hoax involving a website for a
phony Interact investment opportunity in a fake company called "Web-
node." DeLl. of Defendant Ulrich, 6 3. To promote their hoax, defend-
ants contacted Business Wire to distribute a phony press release about
their bogus company. Id., 6 5. Business Wire would never have attached
its trademark to the release and distributed it in its business chan-
nels had defendants disclosed that the release was a hoax. DeLl. of
Cathy Baron Tamraz, ~ 4; Deal. of Nell Bardach, p 4.
Consequently, defendants deliberately misled Business Wire. They did
not inform Business Wire the press release was phony and its contents
false. Instead, defendants deceived Business Wire into believing they
were acting on behalf of a legitimate company and represented that the
contents of the release were accurate. Decl. of Lauren Kunis, 6 3 &
Exh. 1. Only on assurances from defendants that Webnode was an actual
company did Business Wire agree to distribute their press release.
Id., 6 3; Tamraz Decl.,p 4.
When the press release was distributed on April 1, 1999, it became
apparent that defendants had deceived Business Wire for a simple
reason: Distributing defendants' press release under Business Wire's
trademark gave their Webnode scheme credibility.
For more than 30 years, Business Wire has distributed press releases
to news organizations, informational databases, and businesses. Tamraz
Decl., 6 2. Subscribers to its services throughout the world rely on
the company's reputation, credibility and goodwill as assurance that
releases Business Wire distributes accurately reflect what actual
companies are saying. Id. Thus when skeptical Internet investors began
questioning the legitimacy of Webnode, defendants traded on the repu-
tation and goodwill of Business Wire's trademark to convince these
investors that the company and investment opportunity were real. I Due
to
Y See, e.g., Decl. of Lisa Sitkin, Exh. 2 WebNode puts out BizWire
press releases. Why do you think WebNode is not, as you say, 'real'?")
(April 1~ 1999 e,mail from defendant
(continued...)
defendants' use of Business Wire's trademark, Internet users and news
organizations were tricked into believing that Webnode was an actual
company. See__~e Ulrich Decl., ~ 7 & Exh. G.
The press release that defendants deceived Business Wire into dissemi-
nating under the Business Wire trademark promoted phony investment
opportunities in Webnode. Comp., Exh. B. Defendants' release falsely
asserted that Webnode had obtained a government contract to raise
money to improve the Internet. id. The release was designed to create
the impression that Webnode was a real company offering a legitimate
investment opportunity and included references to such publicly traded
companies as AT&T and Microsoft. Id. To further hype their hoax,
defendants posted their bogus press release, with the Business Wire
trademark attached, to their fictitious World Wide Website at
www.webnode.com. Ulrich Decl., 6 5. More than 1 ~000 investors viewed
the phony press release posted to the Webnode website, contacted
defendants and/or registered to invest. See id~., 6 7_
Defendants' press release, and their Webnode website, did not indicate
that the press release and company were part of a joke or parody. Nor
did they mention or discuss the subject of internet investment scums
and contained no warning against such schemes.
When defendants' subsequently announced that their press release and
website had been a hoax, they did not at that time claim that the hoax
had been perpetrated in order to educate the public about the menace
of Internet investment seams. Instead, defendants at the time touted
their clever "3rd annual April Hoax" and used their phony website for
the commercial purpose of advertising Magnetic Diary Studios, which is
the Website Design firm of defendant Bill Ulrich. See Ulrich Decl.,
Exh- F.2
~-~(...continued)
Shell), Exh. 3 CI think it's on the level. Did you see the release:
[linking to press release with Business Wire trademark]") (April 1,
1999 e-mail from defendant Ulrich).
2_~ This is not the first time that defendant Ulrich has used defend-
ants' phony websites that he has designed to promote his business. See
Sitkin Decl., Exh. 1. And defendant Shell ~s currently a defendant in
at least one other lawsuit, which alleges that her self-proclaimed
efforts to "expose" Internet investment seams are a part of a scheme
to profit off of shortselling stocks that defendants criticize on the
Internet_ Se~e Request for Judicial Notice, Exh_ 1.
When Business Wire discovered it had been deceived by defendants, it
removed the press release from its website and demanded that defend-
ants remove the Business Wire trademark from the release posted to
their Webnode website. Tamraz Decl., 4 6. Defendants refused, opting
instead to change the trademark on the press release from BUSINESS
WIRE to BIDNESS WIRE, which is confusingly similar to Business Wire's
registered trademarks. Id.; Ulrich DeLl., 4 12. Unapologetic, defend-
ants then accused Business Wire. of knowingly allowing fraudulent
activities to be conducted via its wire service. Id.; Comp., 44 29,
67. Unable to obtain meaningful relief from defendants, Business Wire
was left with no choice but to file this lawsuit for violation of the
federal Lanham Act, state trademark dilution, breach of contract,
fraud, defamation, unfair competition and civil conspiracy. Tamraz
Decl., 6 7.
In response, defendants filed a special motion to strike Business
Wire's federal and state law causes of action under California's anti-
SLAPP statute, Code of Civil Procedure ' 425.16. Business Wire then
filed an expedited ex parte application to bifurcate the proceedings
on the special motion to strike so that the threshold issue of whether
defendants have carried their burden of showing ' 425.16 actually
applies to any of these causes of action )before Business Wire is put
to the burden of making the showing of a probability of success on he
merits required of any causes of action to which ' 425.16 applies.
Defendants opposed Business Wire's application to bifurcate, but in an
Order dated July 7, 1999, this Court granted Business Wire's applica-
tion and bifurcated the proceedings.
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