Facebook, Inc. v. Power Ventures, Inc.: Shotgun-Toting Borrowers of Jewelry From Bank Safe Deposit Boxes and the CFAA. Wait. What?

by Seyfarth Shaw LLP
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On July 12, 2016, the Ninth Circuit filed its published opinion in Facebook, Inc. v. Power Ventures, Inc., et al., Case No. 13-17154 (“Power Ventures”).  Power Ventures is the latest in a series of decisions from the Ninth Circuit relating to the type of activities potentially giving rise to liability under the Computer Fraud and Abuse Act (18 U.S.C. §1030) (“CFAA”). Power Ventures has potentially important implications for the ways that businesses create, store, and monetize data through computers and web-based applications. Unlike the court’s Nosal line of decisions, Power Ventures is focused more on internet-based conduct that may violate the CFAA.

The underlying legal dispute between the parties began in 2008, when Facebook filed suit against Power Ventures, Inc. (“Power”) in the USDC for the Northern District of California. Power, which aggregated data from different social networking sites using, among other things, automated scripts (i.e., “scraping”), enabled people with various social media accounts to access all of their information in one place. Power used user-provided social media log-in information to import people’s information to a Power portal. In an effort to promote itself and attract users, Power then contacted via e-mail Facebook users’ friends, making it appear as if the e-mails came from Facebook.

Upon learning of Power’s activities, Facebook sent Power a cease and desist letter and used IP blocks in an attempt to prevent Power from obtaining Facebook data (IP blocking is a process by which a computer or network is directed to ignore all communications from a particular IP address). But Power continued to copy Facebook data and took measures to evade the IP blocks.

Although the Ninth Circuit analyzed whether Power’s conduct violated the federal CAN-SPAM Act (finding that it did not, and reversing District Court Judge Lucy Koh), the court’s analysis of the CFAA issues are most noteworthy. The court first walked through its United States v. Nosal CFAA decisions (from 2012 and July 5, 2016; see our coverage of these decisions here and here) to “distill two general rules” in analyzing the issue of authorized access under the CFAA:

(1) “a defendant can run afoul of the CFAA when he or she has no permission to access a computer or when such permission has been revoked explicitly” (noting that “once permission has been revoked, technological gamesmanship or the enlisting of a third party to aid in access will not excuse liability”); and

(2) “a violation of the terms of use of a website—without more—cannot be the basis for liability under the CFAA.”

Applying these rules, the court noted that Power users “arguably gave Power permission to use Facebook’s computers to disseminate messages” (further stating that “Power reasonably could have thought that consent from Facebook users to share the [Power promotion] was permission for Power to access Facebook’s computers”) (emphasis in original). Importantly, the court found that “[b]ecause Power had at least arguable permission to access Facebook’s computers, it did not initially access Facebook’s computers ‘without authorization’ within the meaning of the CFAA.”

The court declined, in a footnote, to “decide whether websites such as Facebook are presumptively open to all comers, unless and until permission is revoked expressly” (citing to a law review article asserting that “websites are the cyber-equivalent of an open public square in the physical world”).
Instead, the court found that a cease and desist letter sent to Power by Facebook expressly rescinded the permission granted by Facebook users to Power and put Power on notice that it “was no longer authorized to access Facebook’s computers.” The letter informed Power that, in Facebook’s view, Power had violated Facebook’s Terms of Use and directed Power to cease using Facebook content or otherwise interacting with Facebook through automated scripts.

Power continued to access Facebook and took steps to evade the IP blocks that Facebook put in place. The court noted discovery from the trial court that appears to reflect a concerted effort by Power to wire around Facebook’s countermeasures and a likely awareness that Power’s conduct implicated the CFAA.

To explain its finding that the Facebook cease and desist letter had revoked Power’s permission to access Facebook, the court analogized the circumstances to a person who wanted to borrow a friend’s jewelry held in a bank safe deposit box. The court said that the borrower would need permission from the bank and the safe deposit box holder to access the box if the bank had determined that it did not want the borrower on its premises (in the court’s example, because the borrower brought a shotgun to the bank when entering to access the safe deposit box).

Although the court’s analogy might have helped it better understand the technology and information flow at issue in Power Ventures, it lacks the nuance that can swirl around alleged “scraping” scenarios where there are sometimes questions concerning whether “access” under the CFAA has occurred and whether there is a protectable or property interest in the data scraped (in the court’s analogy, the jewelry was the safe deposit box holder’s property, but what was the data equivalent in Power Ventures and, under different facts, what might be the bank’s property interest?).

The court then went on to distinguish Power from its Nosal decisions and, in doing so made some interesting observations (arguably in dictum) about the legal effect of Facebook’s Terms of Use. The court observed that “Facebook and Power had no direct relationship, and it does not appear that Power was subject to any contractual terms that it could have breached.” It is unclear whether, by making this statement, the court is saying that, by its conduct, Power and Facebook had not entered into a contract (e.g., the Facebook Terms of Use) or rather there simply were no terms within the Terms of Use that prohibited Power’s conduct.

Notably, Facebook does not appear to have pleaded a breach of contract claim in the trial court.

In any event, whether a website’s terms of use will apply to and bind a party that attempts to “scrape” data from the website is likely to be further litigated as the intersection of traditional contact formation principles meet the evolving standards under “browser-wrap” and “click-wrap” agreements.

This much is clear from Power Ventures: Those who use websites to conduct business would be well-served to (1) carefully consider the drafting and use of website terms of use; (2) diligently monitor their websites and associated computers/servers for any access, and the means of access, by anyone other than authorized users; and (3) where unauthorized access is detected, to act promptly to notify in writing those who have potentially made such access of the conduct alleged to be improper/unlawful and demand that such conduct cease.

Cyberspace and e-commerce law will continue to evolve rapidly, so banks best keep an eye out for those skilled in the programming arts along with shotgun-toting borrowers of jewelry.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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