LJN Newsletters

A debtor has a fiduciary duty to maximize the value of the assets of its estate. When selling assets of a bankruptcy estate, the process usually begins with an extensive marketing process. As a result of extensive marketing, a debtor can find itself actively negotiating with numerous potential purchasers. While most marketing periods end with a court-approved auction, it has become commonplace for the debtor to enter into the auction process with a "stalking horse" agreement in place.

As explained in last month's article, there has been a great deal of confusion in the courts regarding Section 365(b)(2)(D). In a detailed opinion on appeal, the Ninth Circuit diverged from two lower courts, holding that the most natural reading of subsection (b)(2)(d) requires a finding that the word "penalty" modifies both "rate" and "provision." This ruling, as discussed in last month's article, caused further confusion in the courts as to interpretation.

While the Children's Online Privacy Protection Act of 1998 (COPPA) was designed to rein in commercial Web sites that target children as buyers of goods, it has caused legal difficulties for those who provide services such as camps, schools, after-school activities and sport clubs. The providers of such services must regularly wrestle with the ways they collect prospects from their sites.

A Manhattan federal judge has enjoined an Internet advertiser from delivering "pop-up" ads to visitors of a retail Web site. Contact lens retailer 1-800 Contacts Inc. requested the injunction pursuant to its suit against Internet "adware" purveyor WhenU.com for trademark infringement and unfair business practices.

The Playboy bunny hopped out of the nation's largest appellate court recently with a ruling that could put a wrinkle in one Internet advertising business model. The Ninth Circuit U.S. Court of Appeals ' with the reservations of at least one judge on the unanimous panel ' ruled that search engines are barred from displaying advertising related to trademarked search terms. In other words, you can't point customers in the direction of one company if they're searching for another.

On Jan. 21, the Recording Industry Association of America (RIAA) announced the filing of a new round of lawsuits against 532 peer-to-peer (P2P) users in its ongoing campaign to deter illegal online trading of copyrighted music. While this is not the first round of such lawsuits directed at P2P users offering large numbers of unauthorized music files for others to download, this round is novel because the cases were filed against 532 "John Does" ' unidentified persons whom the RIAA can identify at this point only by their IP addresses. The balance of this article will briefly discuss the potential hurdles that the RIAA will face under this new strategy, and what it likely means for the long term success or failure of the industry's effort to deter unauthorized online downloading and recapture lost customers.

Recent developments in Internet law and in the Internet industry.

On Dec. 1, 2003, the United States Supreme Court agreed to consider whether a constructive discharge caused by a supervisor's sexual harassment constitutes a tangible employment action that bars an employer from raising the defense that the employee unreasonably failed to employ the employer's procedures for preventing and correcting such conduct. In granting the Pennsylvania State Police's request for review from the United States Court of Appeals for the Third Circuit's decision in Suders v. Easton, 325 F.3d 432 (3d Cir. 2003), the Supreme Court has the opportunity to resolve a growing conflict among the circuit courts regarding the availability of the so-called Ellerth/Faragher affirmative defense in constructive discharge cases.