"Message-Board Pranksters Settle Business Wire Suit
Three message-board users have settled a closely watched lawsuit brought
against them by Business Wire over an April Fools' prank.
Business Wire, a wire service that
distributes press releases for a fee, received
$27,500 and an agreement from the three to
remove portions of a Web site that the
company disputed. Janice Shell, Jeffrey Mitchell and William Ulrich, all
well-known members of the Silicon Investor stock-chat site
(www.techstocks.com), say they believe they could have won the case but
couldn't afford to continue to fight it.
Business Wire sued the group after it paid the wire service to distribute a
phony press release as part of a prank earlier this year. The three set up a
Web site on April 1 for a fake company called Webnode
(www.webnode.com) that purported to be auctioning off pieces of the
Internet. Scores of message-board users expressed interest in investing in
the company before the group revealed the prank later that day. The three
say they created the hoax to educate investors about fraud on the Internet,
and how easy it is for investors to be taken in.
The payment to Business Wire was covered by Mr. Mitchell's
homeowner's insurance policy. The terms of the settlement are public, and
both sides are free to discuss the case -- something relatively unusual in
settlements.
"I'm very glad it's over. We all are," says Ms. Shell, an art historian who
lives in Milan. "We were rather naive about how the law works. I certainly
wouldn't call this justice."
Business Wire says it considers the settlement
a victory. "I'm happy with the result. We got
what we wanted," says Lorry I. Lokey,
president of the San Francisco wire service.
"There's no way we're going to have our future
jeopardized by this type of operation. We're
not going to sit still and take these kinds of insults."
Business Wire filed the Webnode lawsuit in April in U.S. District Court in
San Francisco, alleging that the prank constituted fraud and infringement of
Business Wire's trademark. The suit also alleged breach of contract,
defamation and conspiracy, and said the three used the service to
"publicize a phony investment opportunity."
Since then the suit has been a popular topic on Silicon Investor, where the
three defendants are well-known for going after companies they believe
are frauds. Most of the chatter about the suit has widely criticized Business
Wire, and characterized the skirmish as a David vs. Goliath matchup.
Message-board users donated some $28,000 to a "Webnode legal
defense fund," Mr. Mitchell says. He says some of that money will be
returned to donors after legal bills are tallied.
Most posters weighing in on the settlement have viewed it as a victory for
the "Webnode three."
Business Wire has maintained that it had to
protect its image, which it said was being
tarnished by the pranksters. Indeed, the three
have been vocal in their criticism of the way
Business Wire has handled the case, and have lampooned the company on
a portion of the Webnode site dedicated to the court case. One
"retraction" posted on the Webnode site, since removed as part of the
settlement agreement, apologized for infringing on Business Wire's
trademark and promised never to mention the name again. The one-page
retraction mentioned Business Wire 44 times.
And the three say that while they've agreed not to repeat the same prank,
they insisted during settlement discussions that they remain free to discuss
the case -- and to continue to criticize Business Wire.
"I really do believe that this case was about silencing a critic who happened
to be pointing out some very true facts," says Mr. Ulrich, who works as a
Web designer in San Rafael, Calif. "Anybody can put out a press release
[on Business Wire] and say pretty much anything they want. Online
investors don't always understand that, and they need to take these things
with a grain of salt."
Mr. Ulrich says he is troubled by the number of companies who use
services like Business Wire to distribute false or misleading information to
investors. He points to the recent case of Uniprime Capital Acceptance, a
Las Vegas owner of automobile dealerships who saw its stock price soar
on the OTC Bulletin Board after a release announcing one of its units had
developed treatment for AIDS.
Securities regulators swooped in immediately and halted trading of the
stock. Regulators also brought fraud charges against Alfred Flores, head of
the Uniprime division that had allegedly developed the treatment. In one
release, Mr. Flores claimed he operated his own immunology-research
laboratory for the past 15 years. But regulators say between November
1983 and September 1992, Mr. Flores was actually serving a prison
sentence for first-degree murder in Colorado. Both Mr. Flores and the
company have denied the allegations, and the case is pending.
Business Wire's Mr. Lokey says he's not familiar with the Uniprime case,
but says the wire service carefully screens press releases before they're
distributed. "We don't just sit still. I can tell you that anyone in the future
that moves a false story on our wire is going to get sued and we're going to
win it," says Mr. Lokey. "We probably do as well or better a job of
weeding out this stuff than The Wall Street Journal does," he says.
The three message-board users claimed Business Wire's suit was a
"Slapp," or strategic lawsuit against public participation. California has an
anti-Slapp statute designed to protect people from lawsuits that try to limit
free speech. But since Business Wire filed its case in federal, not state,
court, the three said it would have been a difficult and costly legal process
to seek to have the anti-Slapp statute applied.
All told, Mr. Mitchell says he and the others involved in the case generated
about $90,000 in legal fees fighting the lawsuit. The bulk of the legal
expenses have been covered by his insurance company, he says.
This wasn't the first April Fools' prank the group has pulled. In 1998 it set
up another fake company, FBN Associates, that supposedly had
developed a number of miraculous fixes for the Y2K computer problem,
and had even received a blessing from the pope. Scores of would-be
investors flooded message boards looking for information about how to
buy stock in the company before the gag was revealed." |
