Defend Trade Secrets Act Claims Subject to CDA Section 230 Immunity
In what is one of the most recent attempts to circumvent the immunity provided in Section 230 of the Communications Decency Act (“CDA” or “CDA Section 230”), the United States District Court for the District of Massachusetts made it clear that claims brought under the Defend Trade Secrets Act (18 U.S.C. §§ 1836, et seq.) (“DTSA”) are not exempt from the scope of CDA immunity. In Craft Beer Stellar, LLC v. Glassdoor, Inc., No. 18-10510, 2018 U.S. Dist. LEXIS 178960 (D. Mass. Oct. 17, 2018)), the district court found that, as stated in the DTSA itself, the DTSA is not an “intellectual property” law, and is therefore not excluded from the scope of the immunity provisions that protect online service providers from being treated as a publisher or distributor of third-party content. The ruling is a victory for online providers, affirming a robust interpretation of CDA immunity and representing what is likely the first judicial view on how federal trade secret claims should be treated under CDA Section 230.
Plaintiff, Craft Beer Stellar, LLC, which owns and franchises craft beer stores, asserted a federal trade secret misappropriation claim under the DTSA and related state claims against defendant, Glassdoor, Inc. (“Glassdoor”). Plaintiff’s claims were based on negative reviews posted by employees of a certain Craft Beer Cellar franchise on Glassdoor’s review website. Glassdoor operates a site where users can anonymously post comments about their employers. Franchise employees posted several negative reviews of business practices and company leadership on the website, with many of the reviews mentioning one of the co-founders by name. After the co-founder emailed Glassdoor to complain about the post, the website removed it for violating its community guidelines, but the user subsequently re-posted the review to be compliant with the guidelines. Plaintiff claimed that, in addition to defamatory content, the posts included confidential trade secrets relating to the business.
Plaintiff asserted two arguments in an effort to bypass Glassdoor’s CDA immunity for publishing user-generated content. First, the plaintiff argued that the decision to remove the review, coupled with permitting an updated review to be re-posted, were material decisions that modified the review’s content and made Glassdoor an author of the post. As an author, plaintiff argued that Glassdoor was outside the scope of the immunity granted to interactive computer services (we have previously written about how authorship is a standard of being a creator or developer of the content at issue). In this case, the judge dismissed plaintiff’s state law claims and sided with Glassdoor, stating that its decision to remove the original post and allow a revised version to be posted constituted a traditional editorial function covered by CDA Section 230.
The second way that the plaintiff tried to avoid the CDA was by asserting a federal trade secret claim and framing the DTSA as a “law pertaining to intellectual property” that would make it exempt from immunity. Subsection (e)(2) of CDA Section 230 (47 U.S.C. 230(e)(2)) states that the statute shall not limit or expand laws pertaining to intellectual property, putting intellectual property laws outside the scope of immunity. But what is an “intellectual property” law? Questions have arisen in the past surrounding whether state right of publicity laws are such laws, and the plaintiff argued that trade secrets, traditionally lumped under IP, should be exempt from CDA immunity. However, the DTSA expressly states in section 2(g) that it “shall not be construed to be a law pertaining to intellectual property for purposes of any other Act of Congress.” The District Court in Craft Beer found this dispositive:
“Because Congress has clearly dictated that the DTSA should not be construed to be a law ‘pertaining to intellectual property’ for the purposes of any other Act of Congress, the DTSA is clearly not such a law for the purposes of § 230(e)(2). The DTSA claim is thus subject to the immunity provisions of § 230, and accordingly that claim will be dismissed.”
We have previously detailed other ways plaintiffs have tried to hold online service providers liable by circumventing CDA Section 230 immunity, most recently in California where plaintiffs strategically failed to name the online service provider as a party. The attempt in Craft Beer may be the first time a party has tried to fit the DTSA into the intellectual property exception found in subsection (2)(e), though it appears Congress foresaw this issue and included statutory language to address it. The district court wasted little ink in interpreting the DTSA as being subject to the broad immunity offered to online service providers. It should be noted that the plaintiff’s Massachusetts state misappropriation of trade secrets claim was also dismissed because the plaintiff could not show that the parties shared a confidential relationship. Because the state trade secret law claim was dismissed on the merits, the court did not address whether Section 230 would have provided immunity for such claims.
The Craft Beer ruling is a solid victory for websites that collect and manage user-generated content. This ruling is yet another decision that affirms the broad immunity afforded to interactive computer services under CDA Section 230.