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Enigma Software Group USA, LLC v. Malwarebytes, Inc.

United States Court of Appeals, Ninth Circuit

September 12, 2019

Enigma Software Group USA, LLC, Plaintiff-Appellant,
v.
Malwarebytes, Inc., Defendant-Appellee.

          Argued and Submitted February 15, 2019 San Francisco, California

          Appeal from the United States District Court for the Northern District of California Edward J. Davila, District Judge, Presiding D.C. No. 5:17-cv-02915-EJD

          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.

          Before: Mary M. Schroeder and Johnnie B. Rawlinson, Circuit Judges, and Robert S. Lasnik, [*] District Judge.

         SUMMARY[**]

         Communications Decency Act

         The panel reversed the district court's dismissal, as barred by § 230 of the Communications Decency Act, of claims under New York law and the Lanham Act's false advertising provision.

         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 § 230's exception for intellectual property claims did not apply because this false advertising claim did not relate to trademarks or any other type of intellectual property. The panel remanded the case for further proceedings.

         Dissenting, Judge Rawlinson wrote that § 230 is broadly worded, and Enigma did not persuasively make a case for limitation of the statute beyond its provisions.

          OPINION

          SCHROEDER, Circuit Judge

         OVERVIEW

         This dispute concerns § 230, the so-called "Good Samaritan" provision of the Communications Decency Act of 1996, enacted primarily to protect minors from harmful online viewing. The provision immunizes computer-software providers from liability for actions taken to help users block certain types of unwanted, online material. The provision expressly describes material of a violent or sexual nature, but also includes a catchall for material that is "otherwise objectionable." 47 U.S.C. § 230(c)(2). We have previously recognized that the provision establishes a subjective standard whereby internet users and software providers decide what online material is objectionable. See Zango Inc. v. Kaspersky Lab, Inc., 568 F.3d 1169, 1173 (9th Cir. 2009).

         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 § 230's broad recognition of immunity. We did not hold in Zango, however, that the immunity was limitless.

         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.

         Malwarebytes contends that it had legitimate reasons for finding Enigma's software objectionable apart from any anticompetitive effect, and that immunity should therefore apply on Enigma's state-law claims, even if the district court erred in its interpretation of Zango. We conclude, however, that Enigma's allegations of anticompetitive animus are sufficient to withstand dismissal.

         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." 47 U.S.C. § 230(e)(2). Enigma has brought a false advertising claim under the Lanham Act, a federal statute that deals with trademarks. Enigma contends that the false advertising claim is one "pertaining to intellectual property" and thus outside the scope of § 230 immunity.

         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 § 230 immunity, Malwarebytes was immune from liability for false advertising. As with Enigma's state law claims, we hold that the district court read Zango too broadly in dismissing the federal claim. We therefore reverse the judgment on this claim as well.

         STATUTORY BACKGROUND

         This appeal centers on the immunity provision contained in § 230(c)(2) of the Communications Decency Act ("CDA"), 47 U.S.C. § 230(c)(1996). The CDA, which was enacted as part of the Telecommunications Act of 1996, contains this "Good Samaritan" provision that, in subparagraph B, immunizes internet-service providers from liability for giving internet users the technical means to restrict access to the types of material described in the subparagraph A. Id. § 230(c)(2)(B). The material, as described in that subparagraph, is "material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable." Id. § 230(c)(2)(A).[1]

         This grant of immunity dates back to the early days of the internet when concerns first arose about children being able to access online pornography. Parents could not program their computers to block online pornography, and this was at least partially due to a combination of trial court decisions in New York that had deterred the creation of online-filtration efforts. In the first case, Cubby, Inc. v. CompuServe, Inc., a federal court held that passive providers of online services and content were not charged with knowledge of, or responsibility for, the content on their network. See 776 F.Supp 135, 139-43 (S.D.N.Y. 1991). Therefore, if a provider remained passive and uninvolved in filtering third-party material from its network, the provider could not be held liable for any offensive content it carried from third parties. See id.

         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, Communications Decency Act, Pub. L. No. 104-104, 110 Stat. 137, as recognized in Shiamili v. Real Estate Group of N.Y., Inc., 952 N.E.2d 1011 (2011). Representative Chris Cox warned during debates on proposed legislation aimed at overruling Stratton Oakmont, that premising liability on providers' efforts to filter out offensive material was deterring software companies from providing the filtering software and tools that could help parents block pornography and other offensive material from their home computers. See 141 Cong. Rec. 22, 045 (1995) (statement of Rep. Cox).

         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 47 U.S.C. § 223, but was later invalidated by Reno v. ACLU, 521 U.S. 844, 877-79 (1997). Before us is OFEA's approach, enacted as § 230(c)(2) of the CDA. See Pub L. No. 104-104, § 509, 110 Stat. 56, 137-39. By immunizing internet-service providers from liability for any action taken to block, or help users block offensive and objectionable online content, Congress overruled Stratton Oakmont ...


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