Cyber Promotions, Inc. v. America Online, Inc.

• Citation: 948 F.Supp. 456
• Decision Date: 26 November 1996
• Docket Number: C.A. No. 96-2486.,C.A. No. 96-5213.
• Parties: CYBER PROMOTIONS, INC. v. AMERICA ONLINE, INC. AMERICA ONLINE, INC. v. CYBER PROMOTIONS, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

948 F.Supp. 456

CYBER PROMOTIONS, INC. v. AMERICA ONLINE, INC.

AMERICA ONLINE, INC. v. CYBER PROMOTIONS, INC.

C.A. No. 96-2486.

C.A. No. 96-5213.

United States District Court, E.D. Pennsylvania.

November 26, 1996.

Michael A. Grow, Vorys, Sater, Seymour and Pease, Washington, DC, Ronald P. Schiller, Piper and Marbury, Philadelphia, PA, for plaintiff America Online, Inc.

Ralph A. Jacobs, Richard M. Bernstein, Hoyle, Morris & Kerr, Philadelphia, PA, Glenn S. Gitomer, McCausland, Keen & Buckman, Radnor, PA, Paul H. Kochanski, Lerner, David, Littenberg, Krumholz & Mentlik, Westfield, NJ, for defendant Cyber Promotions, Inc.

MEMORANDUM OPINION AND ORDER

WEINER, District Judge.

A mere two days after this Court ruled in a Memorandum Opinion and Order dated November 4, 1996 that Cyber Promotions, Inc. ("Cyber") does not have a right under the First Amendment to the United States Constitution or under the Constitutions of Pennsylvania and Virginia to send unsolicited e-mail advertisements over the Internet to subscribers of American Online, Inc. ("AOL"), Cyber filed a motion for leave to amend its First Amended Complaint to assert an entirely different yet equally untenable theory which it claims gives it the right to use AOL's private property free of charge to send millions of e-mail advertisements to AOL subscribers — that AOL's blocking of Cyber's e-mail advertisements in favor of its own advertising violates the federal antitrust laws. Specifically, Cyber contends that AOL has obtained a monopoly in the market for providing direct marketing advertising material via electronic transmission to AOL's own subscribers in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Proposed Second Amended Complaint at ¶¶ 119-21. Not only has Cyber sought leave to file a Second Amended Complaint alleging its monopolization theory, it has also moved for injunctive relief in the form of a temporary restraining order on that claim. Cyber, however, has not cited nor has our research disclosed a single case which has granted a temporary restraining order in a Sherman Act case. In any event, after reviewing the parties' submissions and hearing oral argument by telephone, we will grant the motion to amend but deny the motion for a temporary restraining order.

The following are facts from our Memorandum Opinion and Order of November 4, 1996 which the parties have stipulated to and which provide background to Cyber's motion for a temporary restraining order.

1. AOL is a private online company that has invested substantial sums of its own money in equipment, name, software and reputation.

2. AOL's members or subscribers pay prescribed fees for use of AOL resources, access to AOL and access and use of AOL's e-mail system and its connection to the Internet.

3. AOL's e-mail system operates through dedicated computers known as servers, which consist of computer hardware and software purchased, maintained and owned by AOL. AOL's computer servers have a finite, though expandable, capacity to handle e-mail. All Internet e-mail from non-AOL members to AOL customers or members and from AOL customers or members to non-AOL members requires the use of AOL's computer hardware and software in combination with the hardware and software of the Internet and the hardware and software of the non-AOL members.

4. Private companies compete with AOL in the online business.

5. Although the Internet is accessible to all persons with just a computer, a modem and a service provider, the constituent parts of the Internet (namely the computer hardware and software, servers, service providers and related items) are owned and managed by private entities and persons, corporations, educational institutions and government entities, who cooperate to allow their constituent parts to be interconnected by a vast network of phone lines.

6. In order for non-AOL members to send Internet e-mail to AOL members, non-AOL members must utilize a combination of their own hardware and software, the Internet and AOL's network.

7. Cyber, an advertising agency incorporated in 1996, provides advertising services for companies and individuals wishing to advertise their products and services via e-mail.

8. Cyber sends its e-mail via the Internet to members of AOL, members of other commercial online services and other individuals with an Internet e-mail address.

9. AOL provides its subscribing members with one or more e-mail addresses so that members can exchange e-mail with one another and exchange e-mail (both sending and receiving) over the Internet with non-AOL members.

10. AOL attached to its Memorandum of Law in Support of its Motion for Partial Summary Judgment on First Amendment Issues three sets of examples of e-mail messages sent by Cyber to AOL members. The first set (Tab 1) consists of a multi-page set of advertisements; the second set (Tab 2) consists of an exclusive or single-advertiser e-mail; and the third set (Tab 3) consists of a document called by Cyber an "e-mag." Under each tab are two examples, the first selected by AOL and the second selected by Cyber. The Court has reviewed all of the examples and notes that many of the ads include get-rich-quick ads, weight loss ads, health aid promises and even phone sex services.

In addition to the parties's factual stipulations, the following factual findings about the Internet itself made earlier this year by our court in American Civil Liberties Union v. Reno, 929 F.Supp. 824 (E.D.Pa.1996) are relevant:

11. The Internet is "a giant network which interconnects innumerable smaller groups of linked computer networks." Id. at 830. In short, it is "a global Web of linked networks and computers ..." Id. at 831.

12. "The Internet is an international system." Id. It is "a decentralized, global medium of communications — or `cyberspace' — that links people, institutions, corporations, and governments around the world. This communications medium allows any of the literally tens of millions of people with access to the Internet to exchange information." Id.

13. "No single entity — academic, corporate, governmental, or non-profit — administers the Internet. It exists and functions as a result of the fact that hundreds of thousands of separate operators of computers and computer networks independently decided to use common data transfer protocol to exchange communications and information with other computers (which in turn exchange communications and information with still other computers)." Id. at 832.

14. Computer users have a wide variety of avenues by which to access the Internet. Id. One such avenue is "through one of the major national commercial `online services' such as America Online, CompuServe, the Microsoft Network, or Prodigy. Id. at 833. These online services offer nationwide computer networks (so that subscribers can dialin to a local telephone number), and the services provide extensive and well organized content within their own proprietary computer networks. In addition to allowing access to the extensive content available within each online service, the services also allow subscribers to link to the much larger resources of the Internet." Id. (emphasis in original). "The major commercial online services have almost twelve million individual subscribers across the United States." Id. Approximately seven million individuals are subscribers of AOL.

15. There are a number of different ways to communicate over the Internet. One such way "is via electronic mail, or `e-mail', comparable in principle to sending a first class letter. One can address and transmit a message to one or more other people." Id. at 834.

The Court has also received an unrefuted affidavit from a UNIX Systems Administrator for AOL who avers:

16. From September 18 through October 21, 1996 AOL received from Cyber an average of 1.5 million e-mail messages per day.

17. From October 21, 1996 to the present, Cyber has continued to send to AOL members, on average, more than one million e-mail messages per day.

18. From November 4 through November 11, 1996, Cyber has sent to AOL members more than 1.9 million e-mail messages per day.

The motivation behind Cyber's assertion of its latest theory which it claims entitles it to send unsolicited e-mail advertisements over the Internet to subscribers of AOL appears to be AOL's implementation of a system "tool" which it calls "PreferredMail — The Guard Against Junk E-Mail". This "tool" allows access to Cyber's e-mail advertisements to those AOL subscribers who wish to receive these advertisements. Cyber objects to this tool because, according to Cyber, it places the onus on the AOL subscriber to take affirmative steps to access Cyber's e-mail by checking off a box on the screen captioned "I want junk e-mail!" and because it groups legitimate advertisers such as Cyber with pornographic advertisers thereby discouraging the subscriber to choose to receive Cyber's e-mail. Cyber likens "PreferredMail" to a "virtual black list" because it "contains the names of Internet advertisers who are responsible for sending the vast majority of unsolicited advertising through the Internet to AOL subscribers." Memorandum of Cyber in Support of Motion for Injunctive Relief at 3-4.

Cyber points out in its Memorandum that AOL does not automatically block its own unsolicited advertising which it transmits to its subscribers under the label "marketing `pop-up' messages". Instead, it places the onus on its subscribers to block these messages by entering an area of AOL called "Marketing Preferences". The Marketing Preferences area advises AOL subscribers that AOL sells the right to target electronic advertising to its subscribers and sells the subscribers names to direct mail advertisers who use the U.S. Postal Service to send unsolicited advertisements. Cyber contends that the "striking distinctions between the means by which an AOL subscriber can receive or block unsolicited advertising from AOL and its...