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Defamation And Internet Content Hosts: The Right To Criticise

A recent move by a software developer to commence court action against a website operator for defamation, could, if successful, set a dangerous precedent for internet users and website owners in Australia.

This latest court battle sees software firm 2Clix taking legal action against the proprietor of a popular community website, Whirlpool, for $150,000 plus costs as a result of two allegedly defamatory threads that criticized 2Clix’s accounting software. 2Clix is further seeking a mandatory injunction to have the critical threads removed from the website after the threads were posted by individuals on Whirlpools online message board.

In 2Clix’s statement of claim filed at the Supreme Court of Queensland in August this year, the plaintiff, 2Clix, claims that the threads contain comments that are “false, malicious, [and] causing financial harm to its trade and business”. Further, 2Clix maintains that “the statements have been intended to produce and have resulted in actual damage to both the plaintiff and its trade and business”. 2Clix’s states that on a number of occasions it asked the defendant to remove the allegedly defamatory material but Whirlpool failed to comply with these demands.

So what did the comments say?

There are over 30 comments outlined in the statement of claim advising Whirlpool users to avoid using the software, complaining about its features and even going so far as to recommended that those thinking of purchasing the software look elsewhere.

For example: “We installed 2Clix’s and ended up throwing it out after only 2 weeks of going live. This company has many problems and I would strongly recommend that any potential users look else where. Do as many checks on their background and be ware [sic]…”.

Another comment reads: “… if I can help this person from making a huge mistake… then I would advise you to avoid this program at all costs…”.

No wonder the 2Clix team is upset!

But is being upset about what someone says about you, your company or products enough to bring a defamation action?

Firstly, to bring a defamation action you need to have ‘standing’, meaning you must have the right to institute a defamation suit. Any individual may institute a defamation proceeding, however corporations are generally excluded from bringing proceedings unless they have less than 10 employees or are formed not for the purpose of financial gain, i.e. non-profit organisations. Therefore, in the above example 2Clix while being a company for the purposes of attaining financial gain, it must be a company with less than 10 employees.

An important question is what is ‘defamation’? In general terms the following must be present to establish defamation:

  1. A defamatory statement (or material) or imputation;
  2. The statement (or material) identifies the plaintiff; and
  3. The statement (or material) is published to a third person, i.e. at least one person other than the plaintiff.

A defamatory statement includes a statement that has the tendency to lower the person in the estimation of others, or that would tend to result in the person being shunned or avoided or that is likely to expose the person to hatred, contempt or ridicule.

Publishing in cyberspace occurs once the material is uploaded, sent or posted on the Internet. It is assumed that once the material is available for viewing on the Internet that it has been viewed by at least one other person.

There has been considerable debate concerning the liability of Internet Service Providers (ISPs) and Internet Content Hosts (ICHs) with respect to defamation. ISPs and ICHs will have defences such as “innocent dissemination”, “fair comment” and “truth”, in addition to amendments made to the Broadcasting Services Act 1992 that provide ISPs and ICHs with some protection from liability for hosting defamatory material so long as they were not aware of the nature of the content. There is no common law or legislative requirement requiring ISPs or ICHs to monitor the content hosted or carried by them.

The problem for Whirlpool is that 2Clix alleges that Whirlpool was aware of the potentially defamatory material. 2Clix maintains that this was brought to its attention through various emails, yet Whirlpool failed to remove the content. Now as a result of its failure to comply, Whirlpool has a costly legal proceeding to contend with.

One argument would be that it would be financially wise for ISPs or ICHs like Whirlpool to conform to the letter of demand alleging defamation and simply take down the critical material. Seen by some to be a weak-kneed approach to commercial bully, it is however for small business operators a commercially wise decision. If 2Clix is successful then not only will website operators start conforming to letters of demand more readily, but also we shall see companies attacking websites that have content criticising their goods and hence reputation.

Seems unfair, maybe. But 2Clix still has to prove that the published statements were false, that they were made in malice and that by leaving the content on the website the defendant caused 2Clix financial loss. This seems particularly difficult especially since there is a third party involved in the uploading of the material.