Can Breaching a Contract Be Computer Fraud?

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Court in ticket resale case says ‘yes,’ if it results in unauthorized access, an essential element of the crime.

The U.S. Department of Justice has brought a Computer Fraud and Abuse Act (CFAA) prosecution in New Jersey against the owners and operators of Wiseguy Tickets Inc., an online ticket seller for concerts and sports events. A critical element in proving most violations of the CFAA, the federal computer crime statute, is that the defendant’s access to the computer (interpreted broadly to include a Web site) that is the object of the criminal activity was “without authorization or exceeds authorized access.” 18 U.S.C. 1030. The defendants are charged with unauthorized access to the Web sites of online ticket vendors (OTVs) such as Ticketmaster and Telecharge for violating the OTVs’ Web site terms of service that prohibit the purchasing of tickets in large amounts for resale to the public.

The district court hearing the case recently denied the defendants’ motion to dismiss the indictment on the ground that it seeks “to criminalize what otherwise would be a breach of contract action for violating the terms of service for ticket sales on” these OTVs. U.S. v. Lowson, No. 10-114 (D.N.J. Oct. 12, 2010). The defendants argued that, “under the government’s theory, a teenager hypothetically could be prosecuted under the CFAA for violating the age requirement restrictions in the terms of service when using a search engine like Google.” Id., slip op. at 10.

The notion that this prosecution is seeking to criminalize a breach of contract will be examined in light of established court decisions interpreting the CFAA and its implications for Web site owners whose legal remedy is not limited to reporting violations to the authorities for criminal prosecution. Web site owners are also entitled under the statute to bring a civil action for damages and injunctive relief. 18 U.S.C.1030 (g).

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