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TZOUGRAKIS v. CYVEILLANCE

May 22, 2001

NICOLE TZOUGRAKIS D/B/A OFFTHERUNWAY.COM, PLAINTIFF
v.
CYVEILLANCE, INC., PR NEWSWIRE ASSOCIATION, INC., ZIFF-DAVIS TV, INC., HOME AUTOMATION SYSTEMS, INC., CMPMEDIA, INC., V-NETWORKS, INC., ZIFF-DAVIS, INC. AND ALLBRITTON COMMUNICATIONS COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Constance Baker Motley, United States District Judge:

OPINION GRANTING SUMMARY JUDGMENT

Plaintiff is Nicole Tzougrakis doing business as offtherunway.com. Plaintiff is suing based on New York state law claims of defamation damaging plaintiffs reputation and business. Plaintiff is claiming damages of $10,000,000 as well as costs and fees. The case is raised under the court's diversity jurisdiction as the parties are citizens of different states and the amount in controversy exceeds $75,000. Plaintiff also raises a federal question jurisdiction trademark claim against one defendant, Cyveillance.

The original named defendants are Cyveillance, Inc., PR Newswire Association, Inc. (Newswire), Home Automation Systems, Inc., CMP Media Inc., V-Networks, Inc., Ziff-Davis, Inc. and Allbritton Communications Co. By stipulation this case was previously dismissed as to defendants V-Networks, Inc. and ZDTV, LLC which was sued as Ziff-Davis TV Inc. By order of June 29, 2000, the court also dismissed the claims against Home Automation, CMP Media and Allbritton. The remaining three defendants are: Cyveillance, Newswire and Ziff-Davis.

Trial was originally scheduled for November 20, 2000. Defendants submitted motions for summary judgment and appeared on the trial date ready to argue the motions or proceed with trial. On May 3, 2001, the court heard argument on defendant's motions to grant summary judgment on plaintiffs federal and state claims. For the reasons set forth below, defendants' motions for summary judgment are hereby GRANTED.

I. BACKGROUND

Plaintiff markets designer goods on the internet to retail customers. Plaintiff claims that all of her goods are legitimate, properly licensed designer products. Defendant Cyveillance is a service that conducts investigations of internet businesses searching for counterfeit goods or goods being sold without permission from the producer.

During the 1998 holiday season, as a publicity effort designed at attracting new customers, defendant Cyveillance conducted an investigation of internet sites selling designer goods to identify sites that were selling counterfeit or unlicensed goods. Cyveillance investigated these sites by using software which uses keywords and search logic to detect sites which might offer counterfeit goods. Cyveillance then used human staff to review the sites targeted by the software, using, inter alia, the following criteria: (1) was the site an unknown retailer; (2) were the goods offered at an implausibly low price; (3) did the designer in question license its goods to be sold on the internet at that time; (4) was there any indication on the web page that the site was an authorized retailer of the goods; (5) what was the quality of the site's text and graphics; and (6) was any individual identified as owning or operating the site. Cyveillance did not attempt to contact any of the sites it identified. Cyveillance also did not order any goods from the sites to examine them.

After identifying a number of internet sites using the methods described above, Cyveillance issued a press release listing the sites, including plaintiffs site, offtherunway.com, that it claimed were selling counterfeit goods. Cyveillance transmitted its press release to defendant Newswire, a distributor of press releases. Cyveillance is a client of Newswire, which distributes press releases for more than 40,000 members to media outlets such as The New York Times, The Washington Post, The Los Angeles Times, Reuters and the Wall Street Journal. Newswire does not review the press releases but does format them prior to distribution to the media. Newswire had previously sent out two press releases for Cyveillance prior to the press release in question in this case. Newswire was aware that Cyveillance was a business that specialized in discovering the on-line sellers of counterfeit goods.

Defendant Ziff-Davis, a publisher which targets business and technology professionals, publishes Inter@ctive Week, a newsweekly magazine. In early December of 1998, Inter@ctive Week received Cyveillance's press release listing offtherunway.com as a marketer of counterfeit goods. Concetta Guglielmo, who had been a reporter for 15 years, was assigned the story and took the following steps to confirm the allegations in the press release: (1) Guglielmo questioned a Cyveillance spokesperson and Cyveillance's CEO about the report; (2) she investigated Cyveillance's client list to determine whether Cyveillance was a reputable company; (3) she visited the listed sites and confirmed the veracity of statements made by Cyveillance regarding the critera it applied; (4) she noted that offtherunway.com had no contact information listed anywhere in its website; and (5) she ran several searches on the internet in an attempt to obtain identifying or contact information as to the operator of the site.

In addition, Ziff-Davis claims that Guglielmo clicked on an email link attached to the offtherunway.com site. Guglielmo claims she sent the site an email stating that the site had been identified as a purveyor of counterfeit goods and asking for comment. Ziff-Davis claims that offtherunway.com never responded to the email and Guglielmo concluded that the owner was declining to comment. Plaintiff claims she never received the email. However, at the hearing on May 3, 2001, plaintiffs counsel did not dispute that the email was sent. In addition, it is undisputed that a later email sent on December 23, 1998 by Guglielmo as a test via the same email link also did not reach plaintiff.

Inter@ctive Week published the article in print on December 21, 1998 and posted the online version on December 22, 1998. On December 23, 1998, plaintiff sent an email to Guglielmo stating that she had seen the article on-line and that it was not true. Plaintiffs father also phoned Guglielmo's editor and furnished a phone number at which offtherunway.com could be reached. Ms. Guglielmo used this number to contact plaintiff. Guglielmo then contacted Cyveillance and informed Cyveillance that plaintiff was denying the allegations. Cyveillance instructed Inter@ctive Week to print a retraction. On December 23, 1998, Inter@ctive Week printed the retraction.

II. DISCUSSION

As set forth below, plaintiff has not established a genuine issue of material fact as to whether Cyveillance was a competitor of plaintiff as required by federal trademark law. Plaintiff also has not established a genuine issue of material fact as to whether defendants were grossly irresponsible in their publication of the press release as required by New ...


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