“Fine less than expected — Colorado firm to pay damages, legal fees.”
After a long drawn legal battle that started in January 2007, between self-styled “Spam King” Scott Richter and News Corp.’s social networking property MySpace, has finally reached an agreement to receive its claimed retributions.
A Westminster, Colorado Internet marketing company, “Media Breakaway LLC,” has been ordered to pay $6 million in legal fees and damages, for allegedly spamming MySpace subscribers with unsolicited advertisements in August 2006.
The company was charged of spamming MySpace’s users with unsolicited advertisements. An arbitrator ruled that Scott Richter and his online marketing company, Media Breakaway LLC, must pay MySpace $4.8 million in damages and another $1.2 million in legal fees for spamming MySpace members. The court’s decision also bans Media Breakaway from the social-networking Web site.
“We respect the arbitrator’s findings regarding violations of MySpace’s terms of use by certain rogue affiliates, particularly during 2006 when the concept of social networks was still in the budding phase,” said Steven Richter, president and general counsel at Media Breakaway and father of Scott Richter, in a statement. “We recognized early on in this process that our company should not profit from the sending of unsolicited commercial bulletins to MySpace users and offered to return any such profit to MySpace, and we continually offered to work with MySpace to resolve mutual concerns.”
According to MySpace, the spamming activities were aimed on a Web address called “consumerpromotionscenter.com” and Media Breakaway was sending the spam messages leaving the impression to users that they were invited by their friends to visit the advertising Web site.
Media Breakaway argued that it is fair to be held responsible for the numerous spam messages sent to MySpace’s subscribers but added that the spam was sent out by some rogue business affiliates who sent messages for Media Breakaway, therefore it will not assume responsibility for affiliates who violated Breakaway’s terms and conditions.
In September 2007, Media Breakaway LLC was entitled one of the fastest growing private companies in the US, ranking No. 189 on the Inc. 500 list with a four-year growth rate of more than 1,100%.
The final award in favor of MySpace was 95% less than the amount originally demanded by MySpace, as the arbitrator determined that “MySpace’s demands are so disproportionate to proven actual damages, or Media Breakaway profits.” The company will not be held responsible for the actions of certain affiliates who violated Media Breakaway’s own affiliate terms and conditions.
The decision was made by an arbitrator on June 12 and the $6 million penalty represents only 5 percent of the total amount requested by MySpace and should be considered a bargain compared to a $230 million verdict in the social network’s favor last month against Sanford Wallace and Walter Rines in US District Court in Los Angeles. The two were found guilty of stealing passwords and sending close to 30 million junk e-mails to the subscribers on MySpace. The decision is the largest anti-spam judgment ever.
MySpace has recently announced a strong stance against spammers and phishers on its site. At this month’s Authentication and Online Trust Alliance conference in Seattle, Hemanshu Nigam, chief security officer at Fox Interactive and MySpace, went into detail about the company’s partnerships with other companies, the FTC and law enforcement to prosecute spammers and protect members’ safety.
“It is not just about blocking, we want the message to be, ‘Do not go to MySpace if you are going to participate in illegal activity,’” Nigam said at the conference.
This is not the first time Richter has been involved in a spam case. Microsoft Corp. won a $7 million settlement against him in a spam lawsuit in 2005, and the state of New York was awarded $50,000 from Richter the year before.
“This reward reflects MySpace’s continued momentum and holistic approach to ridding the site of spammers and phishers,” MySpace said in a statement. “We will continue to do our part in cleansing the Internet of this invasive onslaught of spam.”