MySpace.com filed a lawsuit against internet advertiser theglobe.com alleging violations of the CAN-SPAM Act and various acts of unfair competition and a breach of contract. Theglobe.com responded by challenging the applicability of CAN-SPAM to its actions, and the enforceability of the MySpace.com Terms of Service (ToS). In a decision resolving cross-motions for summary judgment, the court clarified the law by dismissing these possible defenses.
Theglobe.com had registered 95 "dummy" profiles on MySpace.com and had used these accounts to send numerous unsolicited messages to other MySpace.com members. MySpace.com contended that the messages violated the provisions of CAN-SPAM while theglobe.com contended that such messages within members of MySpace did not constitute electronic mail (CAN-SPAM applying to e-mail but not necessarily other forms of communication). While the court acknowledged the difference between internet e-mail that the e-mail messages within the MySpace network, the court also noted that the statutory definition of e-mail in CAN-SPAM covered both types of messages. Therefor, the court held that the internal messages were still e-mail within the meaning of the CAN-SPAM statute and thus dismissed that portion of theglobe.com's defense.
MySpace was also requesting several thousand dollars as liquidated damages under the ToS, to which every member is required to agree. Theglobe.com responded by alleging that the ToS was a contract of adhesion and unconscionable, and was therefore unenforceable. The court noted that theglobe.com could have rejected the ToS and simply paid for advertising on MySpace.com, but had instead decided to proceed under the ToS. Further, although many of the provisions of the ToS favored MySpace.com, the court found that on the whole none of the provisions shocked the conscious and none of the provisions were hidden or otherwise unknown to theglobe.com. Thus, the court held the ToS to be enforceable and violated by theglobe.com. Finally, because of the numerous hidden costs to unsolicited e-mails, the court held the $50 per message liquidated damages provision to be reasonable.
Accordingly, the court denied the defenses raised by theglobe.com and granted summary judgment on several of the counts raised in the MySpace.com complaint. Thus, when conducting commercial activity within a social network or virtual world, it is important to use due diligence to investigate all the terms of service and know the consequences of actions in the social network or virtual world. [MySpace Inc. v. The Globe.com, CV 06-3391 RGK (JCx), C.D. of California, Civil Minutes entered on February 27, 2007]