Content Blocking for Anticompetitive Reasons Not Within Scope of Section 230 Immunity: Ninth Circuit | Practical Law

Content Blocking for Anticompetitive Reasons Not Within Scope of Section 230 Immunity: Ninth Circuit | Practical Law

In Enigma Software Group USA, LLC v. Malwarebytes, Inc., the US Court of Appeals for the Ninth Circuit reversed the district court's dismissal of an action as being barred by Section 230 of the Communications Decency Act of 1996 (CDA), holding that Section 230 immunity does not extend to an anti-malware software provider that blocks programs for anticompetitive reasons and that the intellectual property (IP) exception to Section 230 does not apply to false advertising claims not involving IP.

Content Blocking for Anticompetitive Reasons Not Within Scope of Section 230 Immunity: Ninth Circuit

by Practical Law Intellectual Property & Technology
Law stated as of 13 Sep 2019 • USA (National/Federal)
In Enigma Software Group USA, LLC v. Malwarebytes, Inc., the US Court of Appeals for the Ninth Circuit reversed the district court's dismissal of an action as being barred by Section 230 of the Communications Decency Act of 1996 (CDA), holding that Section 230 immunity does not extend to an anti-malware software provider that blocks programs for anticompetitive reasons and that the intellectual property (IP) exception to Section 230 does not apply to false advertising claims not involving IP.
On September 12, 2019, in Enigma Software Group USA, LLC v. Malwarebytes, Inc., the US Court of Appeals for the Ninth Circuit reversed the US District Court for the Northern District of California's ruling, holding on two issues of first impression that:
  • Immunity for computer security software providers under Section 230 of the Communications Decency Act (CDA) for blocking objectionable content does not extend to content that the provider blocks for anticompetitive reasons (47 U.S.C. § 230).
  • The intellectual property (IP) exception to Section 230 immunity does not apply to false advertising claims brought under Section 1125(a) of the Lanham Act, unless the claim involves IP (15 U.S.C § 1125(a)).
( (9th Cir. Sept. 12, 2019).)
Enigma Software Group USA, LLC, an anti-malware software provider, sued Malwarebytes, Inc., also an anti-malware software provider, in the Northern District of California alleging deceptive business practices and tortious interference with business and contractual relations in violation of New York state law and false advertising in violation of Section 1125(a) of the Lanham Act. Enigma based its action on Malwarebytes' act of configuring its filtering software to block users from accessing Enigma's competing software in order to divert Enigma's customers.
Malwarebytes moved to dismiss, claiming that it was immune from liability under Section 230 of the CDA, which immunizes certain service providers from liability for blocking or helping users to block obscene, excessively violent, or "otherwise objectionable" online content (47 U.S.C. § 230(c)(2)). The district court dismissed the action, relying on the Ninth Circuit's decision in Zango Inc. v. Kaspersky Lab, Inc., 568 F.3d 1169 (9th Cir. 2009) addressing Section 230 immunity for filtering software providers.
On appeal, Enigma alleged that Malwarebytes blocked Enigma's programs for anticompetitive reasons, not because the programs were objectionable within the meaning of Section 230. Malwarebytes argued that, based on the "otherwise objectionable" catchall language in the statute, it has immunity regardless of any anticompetitive purpose.
The Ninth Circuit reversed the district court's judgment on the state law claims and the Lanham Act false advertising claim. The court explained that:
  • The district court's interpretation of and reliance on Zango to provide Malwarebytes with unlimited immunity was incorrect because:
    • that case did not consider the issue of whether there were limits on a provider's discretion to determine what content is "objectionable" for purposes of Section 230 immunity; and
    • although two district courts have relied on Zango to dismiss similar actions against Malwarebytes, other district courts have recognized limitations on the scope of Section 230 immunity.
  • Malwarebytes' position that Section 230 immunity applies regardless of anticompetitive purpose is contrary to the CDA's history and purpose, which was to foster competition among filtration software providers, not suppress it.
  • The Section 230(e)(2) exception to Section 230 immunity covers claims related to an IP right under federal law, and does not apply to false advertising claims unless they involve IP rights because:
    • not all claims brought under the Lanham Act involve trademarks; and
    • the IP exception is a limitation on Section 230 immunity and the CDA's stated purpose—to preserve the competitive free market—pushes against an expansive interpretation of the exception that would diminish the scope of the immunity.
  • Malwarebytes' mischaracterizing Enigma's most popular software programs in order to divert Enigma's customers to Malwarebytes does not relate to or involve trademark or any other IP rights.
Circuit Judge Rawlinson issued a dissent, arguing that neither the statutory provisions nor Zango support a different outcome for the Section 230 immunity when the parties are competitors.