New.Net v. Lavasoft, CV 03-3180GAFCWX.

Citation356 F.Supp.2d 1071
Decision Date06 November 2003
Docket NumberNo. CV 03-3180GAFCWX.,CV 03-3180GAFCWX.
PartiesNEW.NET, INC., Plaintiff, v. LAVASOFT, an entity of unknown form; Nicolas Stark Computing AB, an entity of unknown form, and Does 1-25, inclusive, Defendants.
CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California

Daniel Scott Schecter, David M. Simonds, Latham & Watkins, Los Angeles, CA, Ryan C. Squire, Stephen C. Chuck, Garrett & Tully, Pasadena, CA, for Plaintiff.

Louis J. Levy, Leventhal Senter and Lerman, Tobey B. Marzouk, Marzouk and Parry, Washington, DC, Thomas M. Norminton, Norminton & Wiita, Beverly Hills, CA, Henry D. Fetter, Doniger & Fetter, Los Angeles, CA, Richard J.J. Scarola, Thomas M. Norminton, Scarola Reavis & Parent, New York City, for Defendants.

MEMORANDUM AND ORDER REGARDING MOTION FOR PRELIMINARY INJUNCTION

FEESS, District Judge.

I. INTRODUCTION

This case presents a dispute between Plaintiff New.net, Inc., a company that downloads software to individual computers through the internet, often without the knowledge or request of the computer user, and Lavasoft, which produces and distributes software that locates programs like the one written by New.net, notifies computer users of their presence, and, if requested, removes these programs from the user's hard drive. Through this litigation, New.net, whose business ultimately "depends on its ability to distribute as many copies of [its] software as possible," seeks an order that Lavasoft cease distributing its software or delete New.net's software from its target list. New.net complains that Lavasoft has: (1) unfairly targeted and has mislabeled New.net's software; (2) inaccurately associated New.net's software with "the worst of the worst" internet downloaders; and (3) recommended to computer users that New.net's program be uninstalled. This activity, according to New.net, constitutes false advertising, unfair competition, common law trade libel, and tortious interference with prospective economic advantage. In the present motion, New.net seeks a preliminary injunction barring the distribution of Lavasoft's program unless it deletes or changes what it says about New.net's software.

Lavasoft contends that its distribution of its software constitutes speech and that New.net seeks an impermissible prior restraint, even if New.net's allegations were found to be true. Lavasoft, however, claims that its program does not mislabel New.net's software, that its inclusion of the New.net software on its target list is not unreasonable, and that it does not recommend deletion of the New.net software, but rather leaves that decision to the computer user. Lavasoft also notes that it distributes its program, a version of which can be obtained without cost, only to individuals who request it because of their desire to identify programs that have found their way onto users' computers without their knowledge or consent. Thus, from Lavasoft's perspective, the case impacts on the right of computer users to control what resides on their hard drives and the uses to which their computers are put.

The Court concludes that New.net's motion is not meritorious. New.net brings this suit, and the present application for preliminary injunction, to protect its ability to surreptitiously download its New.net software by silencing a company whose computer program, at the request of a computer owner, calls attention to NewDotNet's presence on the user's hard drive. Correctly understood, the contest in this case is between computer users, who acquire software precisely to determine what programs they may have unsuspectingly loaded onto their hard drives, and New.net, which apparently needs the ability to deliver its program to as many unwitting users as possible to further its business plan. Accordingly, New.net's case requires the Court to determine whether it may grant the requested injunction without running afoul of the First Amendment prohibition against prior restraints. The Court concludes that, whether or not the speech is viewed as less-protected "commercial speech," it falls within the scope of First Amendment protections because it addresses a matter of public interest. Under these circumstances, the Court's ruling in this preliminary proceeding may not turn on whether the statements in dispute are true or false, although, as discussed in this memorandum, the Court finds that New.net presents no persuasive evidence that any of Lavasoft's statements are false. Thus, on First Amendment principles, the motion for preliminary injunction must be DENIED.

II. PERSONAL JURISDICTION

Before turning to the merits of this case, the Court must address the issue of personal jurisdiction and proper service of summons on Defendants, who are aliens. Defendants have answered Plaintiff's complaint, but have asserted affirmative defenses as to personal jurisdiction and sufficiency of service. (Answer at 6). Defendants' opposition to the present motion also seeks to preserve the defenses (opp. at 1), but at the same time responds to the merits of the motion. Further, Defendants have filed several papers with the Court in addition to the opposition, including a joint stipulation to extend time to answer, an ex parte request to move the hearing on the preliminary injunction, and a joint scheduling conference report.

As it began its review of this motion, the Court noted that Defendants had raised the issue of personal jurisdiction, and therefore issued an order to the parties to present argument on that issue to permit the Court to address its jurisdiction before expending substantial judicial resources on the substance of the pending motion.1 The parties, however, ignored the Court's order and provided no response. Thereafter, Defendants appeared at the hearing on this motion, argued its merits, and never once complained that the Court lacked personal jurisdiction over the dispute.

Under the circumstances now before the Court, the question of whether Defendants have waived the defense is presented. Ordinarily, one preserves a defense by timely raising it. Peterson v. Highland Music, Inc., 140 F.3d 1313, 1318 (9th Cir.1998). However, having raising the defense at an early stage of the proceedings does not mean that a party cannot thereafter waive it. As the Peterson court noted, "[m]ost defenses, including the defense of lack of personal jurisdiction, may be waived as a result of the course of conduct pursued by a party during litigation." Peterson, 140 F.3d at 1318. The Peterson court provided an example:

[I]f a defendant were to engage in "sandbagging" by raising the issue of personal jurisdiction on a motion to dismiss, deliberately refraining from pursuing it any further when his motion is denied in the hopes of receiving a favorable disposition on the merits, and then raising the issue again on appeal only if he were unhappy with the district court's ultimate decision, then we would not hesitate to find that the defendant had waived any right to pursue the defense.

Id.; see also Rice v. Nova Biomedical Corp., 38 F.3d 909, 915 (7th Cir.1994) (personal jurisdiction defense deemed waived despite its timely assertion as a result of defendant's defense on the merits and failure to renew the jurisdictional issue); Continental Bank, N.A. v. Meyer, 10 F.3d 1293, 1297 (7th Cir.1993) (district court's finding of waiver upheld by circuit where defendants had fully participated in litigation of the merits without objection); see also Yeldell v. Tutt, 913 F.2d 533, 539 (8th Cir.1990).

Here Defendants were given an opportunity to litigate the personal jurisdiction issues before the Court addressed the merits of the pending motion. Defendants simply refused to do so. Furthermore, since they first raised the issue, they have participated actively in the proceedings to date, including the appearance at, and participation in, oral argument regarding the preliminary injunction while remaining silent as to the issue of personal jurisdiction. Moreover, they have noted their intention to file a motion to dismiss Plaintiff's state law claims under California's anti-SLAPP provision. Under all of these circumstances, the Court concludes that Defendants have waived their right to assert the Court's alleged lack of personal jurisdiction as a defense in this case. The Court proceeds to the merits of New.net's motion for preliminary injunction.

II.

FACTUAL BACKGROUND
A. THE PARTIES
1. New.net

Plaintiff New.net describes itself as a "leading domain name registry and provider of domain name extensions." (Compl. at 2). New.net apparently generates revenue through the sale of domain names in nonstandard format such as .free and .shop. These are not "true" domains akin to .edu, .gov, .org, or. com under existing internet naming conventions, so each of New.net's nonstandard names must be linked to a site using a traditional extension such as .com. Thus the nonstandard domain name "Costumes.shop," might be linked to "Costumes.shop.cexx.org." (Opp.Exh. G). However, without special software, either loaded onto a user's computer or incorporated into the software of an internet service provider, an internet user who types a nonstandard domain name into his or her browser will not be able to locate the website. New.net deals with this problem by providing software, "NewDotNet," that recognizes the nonstandard extension and connects the user to the a web site without requiring the user to know and enter the site's "true" name.2

Because New.net generates its revenue through the sale of these nonstandard domain names, its ultimate success depends on maximizing the value of these names by generating internet traffic to these sites. That is, it needs to enable increasing numbers of end users — most of whom have never sought to do business with New.net — to access New.net customers' websites. This in turn requires the installation of NewDotNet on computers in the hands of the general consuming public. New.net concedes that its "success depends on its...

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