Transcript of Preliminary Injunction Ruling - June 22, 2004, Inc., v. The State of Utah - Case Documents

Due to poor quality of the PDF transcript of the preliminary injunction ruling, I have prepared this plain-text transcript for readers' convenience. The PDF transcript is the more authoritative copy, and any discrepancies between this text and the PDF reflect my errors in retyping.


THE COURT: vs. The State of Utah and others. I'm sorry, I meant to say let's reconvene in an hour, and I think I probably said 45 minutes.

This matter is before the Court to consider plaintiff's application for a preliminary injunction restraining and enjoining defendant from enforcing the provisions of Title 13, Chapter 39, Section 101, and those sections that follow.

The governing rule for these proceedings is Rule 65(a) of the Utah Rules of Civil Procedure. The rule has four requirements of proof, the burden on plaintiff, before the injunction may issue.

First, plaintiff must demonstrate that it will suffer irreparable harm unless the injunction issues. Towards that end plaintiff has presented evidence and argument attempting to show that compliance with the provisions of the statute is either technologically impossible or possible but extensive.

Additionally, some vagueness to the statute adds an element of uncertainty as to what is required to be in compliance. That uncertainty and the private enforcement provisions expose plaintiff to a potential plethora of litigation.

Also, plaintiff is confronted with the possibility of regulation that may be different from, and even conflicting from state to state. The ability to accommodate these different and conflicting regulations may not be possible, but if possible it will likely entail some expense.

Further, this uncertainty coupled with the statutory restrictions on pop-up advertising the and the severe penalties, plaintiff speculates, will discourage plaintiff's bundling partners.

Consequently plaintiff alleges that unless the injunction issues, it will incur expense, an inability to conduct business, a loss of necessary business partners, all resulting in economic damages and litigation from those seeking to enforce violations of the statute.

As it relates to the economic damages, typically these economic damages are not considered irreparable. If plaintiff prevails on its claims it usually anticipates and should anticipate that there will be an award for economic losses.

In this case, however, where the action is against the State of Utah and the claim is that the acts of the legislature are unconstitutional, plaintiff would at best, if it prevails, have judicial declaration that the statute is unconstitutional and permanent injunction prohibiting its enforcement. Economic loss will not be recovered through this lawsuit, and thus is irreparable.

In considering the submissions and the testimony on this necessary showing, the Court concludes that plaintiff has met its burden, and demonstrated, for the reasons I've already articulated, that irreparable harm will result to plaintiff if the injunction does not issue.

The second and third requirements imposed on plaintiff by the rule can be analyzed together. They require that the Court be persuaded that the threatened injury, as previously discussed, to plaintiffs, outweighs whatever damage may be caused to the defendants, and that the injunction prohibiting enforcement of the statute would not be adverse to the public interest.

It is not and nor should it be the problem of the Court to dictate to the legislature what it should do. On the other hand, when a case in controversy is properly before the Court, it is the Court's responsibility to determine whether an Act of the legislature runs contrary to the Constitution.

This responsibility should be exercised judiciously, keeping in mind that there is a public policy to give full effect to the Acts of the legislature. However, it is in the public interest that Acts of the legislature meet Constitutional muster.

Consequently, where there are serious challenges to an Act of the legislature which could result in a declaration that the statute is unconstitutional, a preliminary injunction staying its enforcement while litigation of those challenges is concluded to a final resolution is not adverse to the public interest.

The damage the defendants suffer if the injunction issues is twofold. First, a legislative Act would not take effect, as intended by the legislature. Second, that protection which the State seeks to confer would be delayed, and those consumers protected would be without that protection.

I appreciate the fact and I think there's some importance to this fact, that the consumer is not a party to these proceedings. However, this is a weighing process. Although the analysis is complicated and the arguments have been long and convoluted, I have concluded that all appropriate things considered, the threatened injury to plaintiff outweighs the injury to defendants.

Finally, plaintiff must demonstrate that there is a substantial likelihood that it will prevail on the Constitutional challenge, or that there are serious issues that should be the subject of further litigation.

The statute in question does three basic things. First, it prohibits without consent or authorization installation of a context based program. Programming that discerns what you're doing on the computer and sends hat information elsewhere.

There are some exclusions, such as computer cookies, although there's a split of opinion whether these exclusions fit the definition of that which is prohibited.

Second, there's a prohibition of any trigger based mechanism pop-up advertising, regardless of whether there is authorization, that obscures to any degree the [illegible] being viewed.

Third, the statute outlines a protocol in making a presentation to a possible recipient that the context based program that must be followed before authorization from the recipient is perfected.

Plaintiff argues that this statute violates several provisions of both the Constitution of the United States and of this state, the Federal Copyright Act.

The Court has viewed the pleadings, reviewed the pleadings, memoranda, the affidavits, and I have heard and considered all of the arguments on this issue. I am not persuaded that there is a substantial likelihood that plaintiff will prevail in any of its Constitutional challenges to the statute, in so far as the statute prohibits unauthorized installation of a computer -- on a computer of context based advertising

However, the statute attempts to do more, and I am persuaded that to the extent there is a prohibition on pop up advertising, and as I've previously indicated, a protocol for paying authorization from the recipient of a programming to perfect consent, there is a substantial likelihood plaintiff will prevail on the basis that these provisions violate the Commerce Clause of Article 1, Section 1 of the United States -- Article 1, section 8, rather, of the Constitution of the United States.

In summary, I find plaintiff on its Constitutional claim demonstrates the substantial likelihood of obtaining an injunction, enjoining enforcement of some provisions but not all provisions of this statute.

The Court having come to this conclusion on the fourth requirement of Rule 65(a), the question becomes, "Can a preliminary injunction enjoin defendants from enforcing portions of the statute while allowing -- enjoin defendants from enforcing portions of the statute, while allowing enforcement of other portions?"

I think it is important that such a division -- that if such a division is to be made, that it be done with specificity. Enforcement o this statute goes beyond this plaintiff and these defendants. There are probably others and maybe many others who are subject to this statute. Plaintiff, defendants, and all others who may be subject, must have that specificity so they can determine what they can, cannot, and must do to both enforce the statute and be in compliance.

Having examined the statute and taken into account what is in terms of this process less than of course full litigation of the issues and of the facts and of the law, I have concluded that such a division for purposes of a preliminary injunction cannot adequately be made, and presents a serious issue that should be the subject of further litigation.

Accordingly, the motion for a preliminary injunction is granted. Defendants are preliminarily restrained and enjoined from enforcing Title 13, Chapter 39, Section 101, and those provisions that follow.

The bond. I am not requiring a bond. Two reasons. First, there has been no demonstration of attorney's fees, which is one of the conditions of the rule; and secondly, the damage to the web site owner or consumer of course are damages that are not recognized by this rule. I agree with Mr. Sullivan's analysis win that regard, and that's not what is anticipated.

Secondly, the rule would require a bond if the -- let me get the exact language here -- well, in terms of wrongdoing or wrong order or wrong injunction. I think the implication there is there be -- that the matter be frivolous in some way, in some fashion, but where there is serious and I find some merit, meritorious challenges, then I don't know that we can have a wrong injunction, a wrongful injunction. That's what I think the statute, the rule intends to focus the bond upon, which is wrongful injunctions.

So consequently, even though the final determination of this matter may go contrary to plaintiff's position, this injunction could not be character -- or this preliminary injunction could not be characterized as wrong. Consequently no bond will be required. if the plaintiffs will prepare the preliminary junction.

Unless there is something further to consider, all of your presentation wsa greatly appreciated and thank you very much. We'll be in recess.