When a Breach of Contract Is Evidence of Computer Fraud

The U.S. Department of Justice has brought a Computer Fraud and Abuse Act prosecution in New Jersey against the owners and operators of Wiseguy Tickets, an online ticket seller for concerts and sports events. A critical element in proving most violations of the CFAA, the federal computer crime statute, is that the defendant's access to the computer (interpreted broadly to include a website) that is the object of the criminal activity was "without authorization or exceeds authorized access." 18 U.S.C. §1030. The defendants are charged with unauthorized access to the websites of online ticket vendors such as Ticketmaster and Telecharge for violating the OTVs' website terms of service that prohibit the purchasing of tickets in large amounts for resale to the public.

The district court hearing the case recently denied the defendants' motion to dismiss the indictment on the ground that it seeks "to criminalize what otherwise would be a breach of contract action for violating the terms of service for ticket sales on" these OTVs. U.S. v. Lowson, No. 10-114 (D.N.J. Oct. 12, 2010). The defendants argued that, "under the government's theory, a teenager hypothetically could be prosecuted under the CFAA for violating the age requirement restrictions in the terms of service when using a search engine like Google." Id., slip op. at 10.

The notion that this prosecution is seeking to criminalize a breach of contract will be examined in light of established court decisions interpreting the CFAA and its implications for website owners whose legal remedy is not limited to reporting violations to the authorities for criminal prosecution. Website owners are also entitled under the statute to bring a civil action for damages and injunctive relief. 18 U.S.C. §1030(g).

The contract upon which the defendants premised their motion to dismiss was the requirement on the OTVs' websites that all internet customers had "to accept" the rules in the terms of service "before buying Event tickets." Indictment ¶ 1(f). These terms of service were designed "[t]o ensure fair access to Event tickets" to the general public. Thus, the OTVs "generally limited the number of seats that an online purchaser could obtain per event" and "prohibited the purchase of Event tickets on their website for commercial re-sale (i.e. purchase by ticket brokers)." Id.

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Source: law.com
By: Nick Ackerman