No immunity for blocking competitor’s programs

The United States Court of Appeals for the Ninth Circuit has reversed a dismissal of a claim by one software provider against another, allowing it to proceed further in Enigma Software Group USA, LLC v. Malwarebytes, Inc. Both Enigma and Malwarebytes make software allowing users to detect and block content such as viruses, spyware or other unwanted content from their computers. As explained in the decision:

Providers of computer security software help users identify and block malicious or threatening software, termed malware, from their computers. Each provider generates its own criteria to determine what software might threaten users. Defendant Malwarebytes programs its software to search for what it calls Potentially Unwanted Programs (“PUPs”). PUPs include, for example, what Malwarebytes describes as software that contains “obtrusive, misleading, or deceptive advertisements, branding or search practices.” Once Malwarebytes’s security software is purchased and installed on a user’s computer, it scans for PUPs, and according to Enigma’s complaint, if the user tries to download a program that Malwarebytes has determined to be a PUP, a pop-up alert warns the user of a security risk and advises the user to stop the download and block the potentially threatening content.

After a revision to its PUP-detection criteria in 2016, Malwarebyte’s software started identifying Enigma’s software as a PUP. As a result, if a user attempted to download one of Enigma’s programs, the user would be alerted to a security risk and the program would be quarantined. Enigma argued that this was a “bad faith campaign of unfair competition” aimed at “deceiving consumers and interfering with [Enigma’s] customer relationships.”

The central legal issue concerned the Communications Decency Act, which immunizes computer-software providers from liability for actions taken to help users block certain types of unwanted online material. The primary motivation behind the Act, which was passed in the 1990s, was to allow for programs which would, for example, allow parents to install software that prevented their children from accessing pornography. However, the relevant provision concerns not only that sort of material, but also includes a catchall phrase giving immunity for software which blocks content which is “otherwise objectionable”. In an earlier decision, Zango Inc. v. Kaspersky Lab, Inc., 568 F.3d 1169, 1173 (9th Cir. 2009), the Ninth Circuit Court of Appeals had decided that this phrase permits providers to block material that either the provider or the user considered objectionable, and Malwarebytes had successfully relied on that at the lower level. The Court of Appeal, however, concluded that this case was distinguishable from Zango.

In Zango there was no dispute over the claim that the blocked material was objectionable, and so the meaning of that term had not been fully considered. The key difference here was that a company was relying on this provision in order to block the content of one of its competitors. In this case, the Court of Appeals determined that “otherwise objectionable” could not be taken to include software that the provider finds objectionable for anticompetitive reasons. They did not go so far as to find that it was limited only to material which was sexual or violent in nature, holding that “spam, malware and adware could fairly be placed close enough to harassing materials to at least be called ‘otherwise objectionable’.” However, the legislation generally was meant to protect competition, and so an anti-competitive purpose would not serve.

Malwarebytes argued that its reasons were not anticompetitive, and that its program:

found Enigma’s programs “objectionable” for legitimate reasons based on the programs’ content. Malwarebytes asserts that Enigma’s programs, SpyHunter and RegHunter, use “deceptive tactics” to scare users into believing that they have to download Enigma’s programs to prevent their computers from being infected.

The Court of Appeals effectively left that claim to be decided at the eventual action, since it was here only overturning the dismissal of Enigma’s suit. They concluded that because Enigma had alleged anticompetitive practices, its claim survived the motion to dismiss.