No.

S169195

IN THE SUPREME COURT OF CALIFORNIA

CRAIG E. KLEFFMAN, Plaintiff and Appellant, vs.

VONAGE HOLDINGS CORP., a New Jersey Corporation, et. alsuPREME COURT

Defendants and Appellants. FilEr)

JUL 0 12009

United States Court of Appeals for the Ninth Circuit

Civil Case Nos. 07-56171 and 07-56292 Frederick K. Omncn Clerk

United States District Court for the Central District of Californ~la:------;::::D-ep-u-:-ty---Honorable Gary A. Feess, Presiding

Civil Case No. CV-07-2406 GAF (JWJX)

Certified Question from the Ninth Circuit, California Rule of Court 8.548

BRIEF OF AMICI CURIAE EMAIL SENDER AND PROVIDER· COALITION AND V ALUECLICK, INC.

IN SUPPORT OF DEFENDANTS AND APPELLANTS

GIBSON, DUNN & CRUTCHER LLP

Daniel M. Kolkey, SBN 79102 555 Mission Street

Suite 3100

San Francisco, CA 94105-2933 Telephone: (415) 393-8200 Facsimile: (415) 393-8206

S. Ashlie Beringer

Michael B. Smith, SBN 235764 Benjamin M. Glickman, SBN 247907 1881 Page Mill Road

Palo Alto, CA 94304 Telephone: (650) 849-5300 Facsimile: (650) 849-5333

Attorneys for Amici Curiae

Email Sender and Provider Coalition and ValueClick, Inc.

No. S169195

IN THE SUPREME COURT OF CALIFORNIA

CRAIG E. KLEFFMAN, Plaintiff and Appellant, vs.

VONAGE HOLDINGS CORP., a New Jersey Corporation, et. al., Defendants and Appellants.

United States Court of Appeals forthe Ninth Circuit Civil Case Nos. 07-56171 and 07-56292

United States District Court for the Central District of California Honorable Gary A. Feess, Presiding

Civil Case No. CV-07-2406 GAF (JWJX)

Certified Question from the Ninth Circuit, California Rule of Court 8.548

BRIEF OF AMICI CURIAE EMAIL SENDER AND PROVIDER· COALITION AND V ALUECLICK, INC.

IN SUPPORT OF DEFENDANTS AND APPELLANTS

GIBSON, DUNN & CRUTCHER LLP

Daniel M. Kolkey, SBN 79102 555 Mission Street

Suite 3100

San Francisco, CA 94105-2933 Telephone: (415) 393-8200 Facsimile: (415) 393-8206

S. Ashlie Beringer

Michael B. Smith, SBN 235764 Benjamin M. Glickman, SBN 247907 1881 Page Mill Road

Palo Alto, CA 94304 Telephone: (650) 849-5300 Facsimile: (650) 849-5333

Attorneys for Amici Curiae

Email Sender and Provider Coalition and Value Click, Inc.

TABLE OF CONTENTS

I. INTRODUCTION 1

II. THE CERTIFIED QUESTION 5

III. PLAINTIFF'S ARGUMENT IS OBLIVIOUS TO BASIC

INTERNET ADVERTISING PRACTICES 7

A. The Purpose ofa Domain Name In An E-mail Address Is To Accurately Identify The Location of The

Sending or Receiving Computer 8

B. The E-Mail Marketing Industry 9

C. Multiple Different Distributors Transmit Advertising For The Same Company, Resulting In Multiple

Domain Names Being Used 11

D. Limited Availability Of Domain Names Makes It Impractical For Publishers To Use A Domain Name

That Identifies The Advertiser Or The Distributor 13

IV. SECTION 17529.5(a)(2) DOES NOT PROHIBIT THE TRANSMITTAL OF UNSOLICITED COMMERCIAL EMAIL ADVERTISEMENTS FROM MULTIPLE BUT ACCURATE DOMAIN NAMES, EVEN IF THE PURPOSE

OR EFFECT IS TO BYPASS SP AM FILTERS 16

A. Based On The Canons Of Statutory Construction, Section 17529(a)(2) Cannot Be Construed To Prohibit The Use of Multiple, Valid, And Traceable Domain

Names, Even If They Bypass Spam Filters 16

l. Section 17529.5(a)(2) Should Be Construed To

Avoid Federal Preemption 16

2. Review Of The Entire State Statutory Scheme Also Demonstrates That Section 17529.5(a)(2) Focuses On Deception In Specific E-mails, Not On The Use Of Multiple Domain Names To

Bypass Spam Filters 21

1

Table of Contents (Continued)

3. The Plain Meaning Of Section 17529.5(a)(2) Demonstrates That It Only Prohibits Falsified, Misrepresented, And Forged Header

Information Intended To Deceive Recipients 24

4. Accurate And Traceable Domains Cannot Constitute "Falsified, Misrepresented, Or

Forged Header Information." 29

V. PLAINTIFF'S EFFORT TO IMPOSE A RULE THAT WOULD PROHIBIT THE USE OF "RANDOM" OR "NONSENSICAL" DOMAINS WOULD RESULT IN AN

ILLOGICAL AND UNWORKABLE STANDARD 33

A. No Workable Standard Exists For Determining Whether A Domain Name Is "Random" Or

"Nonsensical." 33

B. PlaintiffIgnores The Fact That ISP Filters Apply Widely Varying and Undisclosed Criteria, Unrelated To Whether "Header Information" Is "Falsified,

Misrepresented, Or Forged." 35

VI. PLAINTIFF'S SWEEPING RULE WOULD CRIPPLE A

LEGITIMATE MULTI- BILLION DOLLAR INDUSTRY 38

VII. CONCLUSION 40

11

TABLE OF AUTHORITIES

Page(s)

Cases

ASIS Internet Services v. Optin Global, Inc.

(N.D. Cal. Apr. 29, 2008) 2008 U.S. Dist. Lexis 34959 19

Asis Internet Servs. v. ConsumerBargainGiveaways, LLC

(N.D. Cal. Apr. 17,2009) 2009 U.S. Dist. Lexis 36523· 20

Asis Internet Servs. v. Vista print United States, Inc.

(N.D. Cal. May 5, 2009) 2009 U.S. Dist. Lexis 41384 20

Ass 'n for Retarded Citizens v. Dep 't of Developmental Servs.

(1985) 38 Cal.3d 384 16, 18

Cal. ARCO Distribs., Inc. v. Atl. Richfield Co. (1984)

158 Cal.App.2d349 i : 21

Coalition for ICANN Transparency, Inc. v. VeriSign, Inc.

(N.D. Cal. 2006) 452 F. Supp. 2d 924, rev'd on other' grounds,

(9th Cir. June 5,2009) 2009 u.s. App. LEXIS 12514 13

Draeger v. Friedman, Sloan & Ross (1991)

54 Cal.3d 26 21, 23

Dyna-Med, Inc. v. Fair Employment & Housing Comm.

(1987) 43 Cal.3d 1379 : 4, 22, 24

Gordon v. Virtumundo, Inc. (W.D. Wash. May 15,2007)

2007 U.S. Dist. Lexis35544 30, 31

Hoang v. Reunion.corn, Inc, (N.D. Cal. Dec, 23, 2008)

2008 U.S. Dist. Lexis 1 03659 19

Hoang v. Reunion.com, Inc. (N.D. Cal. Oct. 6, 2008)

2008 U.S. Dist. Lexis 85187 19

In re Marriage Cases (2008)

43 Cal.4th 757 17

Jarrow Formulas, Inc. v. LaMarche (2003)

31 Cal.4th 728 26

Kleffman v. Vonage Holdings Corp. (9th Cir. 2008)

551 F.3d 847 5

Kleffman v. Vonage Holdings Corp. (C.D. Cal. May 22, 2007)

2007 U.S. Dist. Lexis 40487 19

III

Table of Authorities (Continued)

Page(s)

NBC Subsidiary (KNBC-TV), Inc. v. Superior Court of Los

Angeles County (1999) 20 Ca1.4th 1178 17

Omega World Travel, Inc. v. Mummagraphics, Inc.

(4th Cir. 2006) 469 F.3d 348 19

People v. Mitchell (2008)

164 Cal.App.4th 442 27

People v. Ryan (2006)

138 Cal.App.4th 360 27

People v. Superior Court (Romero) (1996)

13 Ca1.4th 497 3, 16, 18

Silverstein v. E360Insight, LLC

(C.D. Cal. Oct. 1,2007) CV-07-2835-CAS 31,32

Software Design & Application, Ltd. v. Hoefer & Arnett, Inc.

(1996) 49 Cal.App.4th 472 27

u.s. v. Kilbride (D. Ariz. 2007)

507 F. Supp. 2d 1051 31

Unocal Corp. v. Kaabipour (9th Cir. 1999)

177 F.3d 755 21

Verizon California Inc. v. OnlineNIC Inc.

(N.D. Cal. Dec. 19,2008) 2008 U.S. Dist. Lexis 104516 15

Statutes

15 U.S.C. § 7701 et seq passim

15 U.S.C. § 7702 : 26

15 U.S.C. § 7707 passim

Bus. & Prof. Code§ 17529 et seq 17,22

Bus. & Prof. Code § 17529.1 35

Bus. & Prof. Code § 17529.2 22, 23, 40

Bus. & Prof. Code § 17529.4 4, 22, 23

Bus. & Prof. Code § 17529.5 passim

Stats. 2004, ch. 571, § 1 18

IV

Table of Authorities (Continued)

Page(s)

Other Authorities

Black's Law Diet. (8th ed. 2004) 28

Corilyn Shropshire, Web is no bottomless pit for dot. com name

seekers, Pittsburgh Post-Gazette (Aug. 16,2006) , 34

David Pogue, The Dr. Seuss Jumble: Naming Websites,

N.Y. Times (Dec. 6, 2007) 34

Federal Trade Commission, Spam Summit Staff Report (Nov.

2007) .. ~ 36

Hamilton Consultants, Inc., lAB Economic Value of

Advertising-Supported Internet Ecosystem (2009) passim

Jan Zimmerman, Web Marketing for Dummies (2d ed. 2008) 9, 11, 12

Kim Peterson, Spam Wranglers, Seattle Times (June 16,2003) 37

Lee Gomes, All The Good Ones Have Been Taken-In Domain

Names Too, Wall Street Journal (July 19,2006) , 14

MarkMonitor, UBS Employs Holistic Approach to Online Brand

Protection with MarkMonitor (accessed June 12,2009) 14

PriceWaterhouseCoopers, Global Entertainment and Media

Outlook: 2008-2012, Executive Summary 39

Rebecca Aronauer, Are You Taking E-Mail Seriously? Sales &

Marketing Management Magazine (Aug. 2007) 37

Sen. Com. on Bus. & Prof., Analysis of Sen. Bill No. 1457

(2003-2004 Reg. Sess.) Apr. 12,2004 23

Sen. Floor Analysis of Sen. Bill No. 1457 (2003-2004 Reg.

Sess.) Aug. 18, 2004 : 18, 24

Tom Zeller, The Fight Against VJ@gra (and Other Spam), NY

Times (May 21, 2006) ~ 37

Veri Sign, Domain Report (June 2009) , 14

Webster's II NewCollege Diet. (2001) 27

v

I. INTRODUCTION

Plaintiffs interpretation of Business and Professions Code section 17529.5, subdivision (a)(2)1 (hereinafter "section 17529.5(a)(2)") ignores the real-world operation of the legitimate e-mail advertising industry, and would (if adopted) have a devastating impact on that multi-billion dollar industry. Amici, Email Sender and Provider Coalition and ValueClick, Inc., submit this amicus brief because-unlike the parties to this proceedingthey are directly involved in the provision of e-mail marketing services to hundreds of thousands of mainstream companies, and understand the industry and technological context for the practices that plaintiff challenges and the consequences to the industry of plaintiff s interpretation of section

17529.5(a)(2).

Specifically, plaintiff contends that the use of multiple, accurate, and traceable domain names in the transmission of commercial e-mail

advertisements violates section 17529.5(a)(2) because the multiple domains might "mislead" a hypothetical software program of an Internet Service Provider ("ISP") that might have been designed to block high-volumeemail traffic coming from anyone domain. As set forth below, both the realities of the industry and the canons of statutory construction require that the question certified by the Ninth Circuit-"Does sending unsolicited commerciale-mail advertisements from multiple domain names for the purpose of bypassing spam filters" violate section 17529.5(a)(2)?-be

answered in the negative.

1· Unless otherwise designated, all further statutory references shall be to the Business and Professions Code.

1

First, there is nothing nefarious about the transmittal of the same advertisement in multiple e-mails using different domain names, even if computer spam filters ultimately do not block those e-mails because they originated from different domains. The decentralized nature of the emarketing industry-and the desire for retailers to reach the most relevant market segments-results in the use of parallel advertising campaigns distributed by dozens of different third-party distributors to different (but potentially overlapping) market segments. As a result, the same e-mail advertisement typically is transmitted by multiple distributors, each using a different "domain name,"just as the same print advertisement may run in multiple different magazines or newspapers at the same time.

Second, because each unique domain name belongs to its registered owner, the distributors of commercial e-mail typically cannot (as plaintiff erroneously suggests) utilize domain names that identify the company whose product or service is being advertised in the particular e-mail. Plaintiffs interpretation of section 17529.5(a)(2) essentially demands that email distributors conceal their actual domains and Internet location, which would create widespread misrepresentations where none exists currently.

Third, the rapidly dwindling pool of available domains has forced companies to adopt domain names that may appear "random" or "nonsensical," and it is common for reputable companies (like Google, Apple, and Staples) to acquire hundreds of seemingly random domain names for a variety of lawful reasons. A domain functions to identify and route mail to a particular computer, and accurate domains serve this purpose, however "random" they may appear. Given widespread e-mailing conventions and a limited number of available domains, the law does not

2

(and could not practically) require domains to "make sense," any more than a license plate that is accurately registered to a car owner must do so.

Fourth, there are additional legitimate reasons why the same company might choose to utilize multiple domain names. For instance, it may do so in order to target a particular advertising campaign to a particular audience, to facilitate internal tracking or routing of particular e-mails, or to track the performance of a particular mailing. In short, the use of multiple domain names (including many domain names that may appear to be "random" or "nonsensical") is essential to legitimate e-mail advertising. Any rule that needlessly constrains this practice would cripple the emarketing industry.

Finally and fortunately, the rule urged by plaintiff is inconsistent with the legally and constitutionally permissible construction of section 17529.5(a)(2) for the following reasons:

1. Section 17529.5(a)(2) makes it unlawful to send an e-mail advertisement that "contains or is accompanied by falsified, misrepresented, or forged header information." (§ ·17529.5, subd. (a)(2).) But as an initial matter, "'[i]fa statute is susceptible of two constructions ... the court will adopt the construction which ... will render it ... free from doubt as to its constitutionality, even though the other construction is equally reasonable." (People v. Superior Court (Romero) (1996) 13 Ca1.4th 497,509.) Here, section 17529.5(a)(2) must be construed to avoid federal preemption by the federal CAN-SPAM Act (15 U.S.C. § § 7701, et seq.), which preempts any state statute regulating the use of electronic mail to send commercial messages unless the statute "prohibits falsity or deception in any portion of a commercial electronic mail message." (15 U.S.C. § § 7707(b).) Any interpretation of "falsified, misrepresented, or forged header information"

3

under section 17529.5(a)(2) that goes beyond traditional common law concepts of falsity and deception within the meaning of the CAN-SPAM Act's preemption clause, or that extends to e-mailingpractices rather than e-mail contents, risks preemption by the express preemption provision of the

CAN-SPAM Act. (See section IV(a)(I),post.)

2. "[S]tatutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible." (Dyna-Med, Inc. v. Fair Employment & Housing Comm. (1987) 43 Cal.3d 1379, 1387.) Section 17529.5(a)(2) cannot be deemed to prohibit the

initiation of commercial e-mail advertisements from multiple, random domain names because concurrently with the enactment of section

\

17529.5(a)(2), the State Legislature enacted another statute as part of the

same statutory scheme, which addressed the use of automated means to register "multiple mail accounts" for the purpose of initiating unsolicited commercial e-mail advertisements (§ 17529.4, subd. (c))-the practice that plaintiff essentially challenges here. Although the State Legislature subsequently acknowledged that this latter statute was wholly preempted by the CAN-SPAM Act, the statute at issue here-section 17529.5(a)(2)-must be given a distinct meaning from section 17529.4 to avoid redundancy in the state statutory scheme at the time of its enactment. (See section IV(a)(2), post.)

3. In determining legislative intent, "a court must look first to the words of the statute themselves, giving to the language its usual, ordinary import .... " (Dyna-Med, Inc. v. Fair Employment & Housing Com., supra, 43 CaL3d at pp. 1386-1387.) The ordinary import of the language,

"falsified, misrepresented, or forged header information," in section

17529.5(a)(2) requires falsity in the content of the e-mail header. The reach

4

of section 17529.5(a)(2) does not extend to e-mail-sendingpractices that are alleged to be "misleading" to inanimate software. Accordingly, the use of multiple, accurate domain names to send unsolicited e-mail advertisements, even if this practice has the purpose or effect of bypassing spam filters, cannot violate section 17529.5(a)(2), because the domain names are not "falsified, misrepresented, or forged." Stated differently, the practice presented here pertains to the mechanics of how groups of e-mails are sent, not whether a particular e-mail contains false or deceptive header information. (See section IV(a)(3), post.)

4. The practice challenged by plaintiff has nothing to do with the plain meaning of the prohibition in section 17529.5(a)(2). ISPs closely guard the secret of how their filters work and the criteria used to filter email. Therefore, the adoption of plaintiff s position that "multiple random and nonsensical domain names bypass spam filters and mislead recipients and their Internet service providers" (Opening Br. at p. I) would premise statutory liability on unknown, unknowable, and varying standards independently imposed by ISPs, which make no assessment of whether e-

mails contain "falsified, misrepresented, or forged header information."

II. THE CERTIFIED QUESTION

The Ninth Circuit certified the following question to this Court:

"[D]oes sending unsolicited commercial e-mail advertisements from multiple domain names for the purpose of bypassing spam filters constitute falsified, misrepresented, or forged header information under Cal. Bus. & Prof. Code [section] 17529.5[, subdivision] (a)(2)?"2

2 Kleffman v. Vonage Holdings Corp. (9th Cir. 2008) 551 F. 3d 847,849.

5

Significantly, both plaintiff and defendants agree that the answer to this question is "no." Specifically, plaintiff admits that "[i]t is not the sending of e-mail advertisements from multiple domain names in and of itself that creates the violation of[s]ection 17529.5(a)(2)." (Reply Br. at p. 2.) Plaintiff also agrees with defendants that the "intent to bypass spam filters cannot create a misrepresentation." (Reply Br. at p. 12.) These concessions that neither multiple domain names nor the intent to bypass spam filters violates section 17529.5(a)(2) conclusively resolve the issue of statutory construction in favor of a finding that the transmittal of unsolicited commercial e-mail advertisements from multiple domain names for the purpose of bypassing spam filters does not violate section 17529.5(a)(2).

However, plaintiff asks this Court to rephrase the issue and to hold that "sending e-mail advertisements from multiple random and nonsensical domain names constitutes misrepresented header information, because intent to bypass spam filters can be inferred from the random and nonsensical nature of the domain names, which render spam filters ineffective." (Opening Br. at p. 6; italics in original.) Plaintiff argues that "it is the nature of the random and nonsensical domain names in the header information ... that create the misrepresentation regarding the actual single authorship of the advertisements." (Reply Br. at p. 12.)

First, as shown in section III herein, the domain name contained in each of the challenged e-mails necessarily belongs to the distributor (the transmitter) of the advertisement, not the company being promoted in the ad, and does not misrepresentthe domain name of the transmitter. To the contrary, it would be misleading if e-mails sent by multiple third parties indicated that they were sent from a domain name associated with the advertiser (in this case, Vonage), rather than with the originators of the e-

6

mails. Moreover, plaintiffs rule, which (bizarrely) would require senders to conceal their own identities by using a domain name that identifies a third party, ignores the real-world operation of the Internet advertising industry, which would be crippled by such a rule. (See sections III & VI,post.)

Second, as shown in section IV herein, the use of multiple, accurate domain names does not fall within section 17529.5(a)(2)'s prohibition against "falsified, misrepresented, or forged header information," which must take its plain and narrow meaning from the context of the entire text of the state statutory scheme and in light of Congress's intent to preempt state laws governing the use of electronic mail to send commercial messages. (15

U.S.C. § 7707(b)(l).)

III. PLAINTIFF'S ARGUMENT IS OBLIVIOUS TO BASIC INTERNET ADVERTISING PRACTICES.

As noted above, plaintiff argues that "it is the nature of the random and nonsensical domain names in the header information . : . that create the

misrepresentation regarding the actual single authorship of the advertisements." (Reply Br. at p. 12.) Plaintiff contends that "Vonage essentially creates multiple deceptive identities, as represented by multiple deceptive domain names," and thereby "creates the misleading idea that the e-mail advertisements are from multiple different sources when they are actually all from Vonage." (Opening Br. at p. 3.) These arguments-and the sweeping rule that plaintiff asks this Court to adopt-rest on several fundamental misunderstandings concerning the function of domain names and mainstream Internet advertising practices.

7

A. The Purpose of a Domain Name In An E-mail Address Is To Accurately Identify The Location of The Sending or Receiving Computer.

A "domain" name functions to identify the online "location" of a particular computer or computer network that is connected to the Internet, much like a street address functions to identify the location of abuilding. In the context of an e-mail address, the domain identifies the location of the sending or receiving machine (so that mail sent to that address can be delivered to the correct computer).

An e-mail address.suchasronald.george@jud.ca.gov. consists of two components: (1) a user name to the left of the @ symbol

("ronald. george"), and (2) a domain name to the right of the @ symbol ("jud.ca.gov"). The user name indicates who (i.e., the specific e-mail account at a particular domain), and the domain name indicates where (i.e., the location on the Internet of the sending or receiving computer). Analogizing this to the physical world, the domain name is like a street address, whereas the user name identifies the mailbox of the person or entity at that address who is the sender or intended recipient. For example, the domain name "jud.ca.gov" points to a computer or computers that handle email for the California appellate courts, but does not identify the particular court or the particular user. And the user name tells the receiving computer at the specified domain the specific mailbox to which it should route the message, just as the name of a person or department on an envelope addressed to 3 50 McAllister Street allows the mailroom to properly route a physical letter.

Contrary to plaintiff s argument, there is no requirement (nor could there be) that the domain contained in an e-mail address identify either the contents of an e-mail (which can be reflected in the "subject" line) or the

8

name of the party sending the e-mail. If there were such a requirement, millions of e-mails sent daily from e-mail addresses containing domain

names like "gmail.com," "comcast.net," or "aol.com" would be deemed

"deceptive" for failing to identify the individuals sending the e-mail message, or the "authors" of its contents.' Plainly that is not the case. Rather, these ubiquitous domain names (like any domain) function to locate and route e-mail to the computer networks that "host" mailboxes at these domains, so that the e-mails can be routed into the correct electronic mailbox.

B. The E-Mail Marketing Industry.

Plaintiffs brief glosses over the critical fact that the e-mails giving rise to his claims were sent by third-party "marketingagents"-and not by Vonage itself. (Opening Br. at p. 2.) This reflects mainstream Internet advertising practices, in which advertisements for the same company may be distributed by multiple different third-party distributors-and not by the company itself or any "single source." (Jan Zimmerman, Web Marketing for Dummies (2d ed. 2008) p. 258 (hereinafter "Web Marketing for Dummies").) Plaintiffs contention that the e-mails at issue in this case "all

3 It is also worth noting that user names, while not at issue here, also frequently do not disclose the identity of the individual or business using a particular e-mail address. In fact, Yahoo! specifically suggests that new users "add[] a unique word to your ID or try an ID that is not based on your name." (See http://edit.yahoo.com/registration.) Although email addresses such as "courtreporter33@gmail.com" or "arc97@aol.com" contain no Clear identification of the parties using such addresses, the law does not (and should not) declare such widespread mailing conventions to be "misleading" or "deceptive."

9

are from Vonage," and that the use of multiple domain names conceals this "fact," is simply wrong. (Opening Br. at p. 7)

This use of multiple third-party distributors to transmit commercial email advertisements is analogous to the "bricks and mortar" world, where most companies rely on various third parties to distribute advertising on their behalf through a variety of different media, with the result that multiple different newspapers, television stations, billboards, or periodicals may run the same ad campaign at the same time. The low cost and global reach of the Internet has allowed businesses to do essentially the same thing online, but on a global scale. Indeed, Internet advertising is the fastest growing advertising medium, and has spawned highly specialized business models that reflect the global reach, technical sophistication, and rapid growth and change of the industry. (Hamilton Consultants, Inc., lAB Economic Value of Advertising-Supported Internet Ecosystem (2009) pp. 23, 58, available at http://www.iab.net/mediaifilelEconomic- Value-Report. pdf (hereinafter "lAB Economic Value Report"); see post, pp. 38-39 & nn. 16-17.) However, companies selling products or services (like Vonage) typically lack the technological expertise, contacts, or infrastructure to reach customers through Internet-based channels. Thus, they tum to specialized partners that assist in distributing their advertisements on websites, through e-mails, or on search engines, so as to reach the relevant market segments. (lAB Economic Value Report, supra, at pp. 18-19,41-43.)

The online advertising industry is inherently structured such that companies seeking to promote their offerings (like eBay, Amazon.com, KMart, Apple, and Disney) rely on multiple, different third-party distributors to deliver the same advertising campaign through relevant online channels. (lAB Economic Value Report, supra, at pp. 41-43.) These third-party

10

distributors work to get the seller's advertisements to relevant consumers, either by placing the seller's ads on relevant Internet websites, bye-mailing ads to targeted consumers, or typically, a combination of these and many other Internet-based methods. By distributing marketing campaigns through networks consisting of multiple online distributors, sellers (like Vonage) are able to reach varied and more targeted audiences and to use Internet-based technology (typically furnished and analyzed by the distributors) to carefully track the performance of specific advertising campaigns by specific distributors. (Jd. at pp. 18-19, 21; Web Marketing for Dummies, supra, at pp. 260-63.)

C. Multiple Different Distributors Transmit Advertising For The Same Company, Resulting In Multiple Domain Names Being Used.

The result of these standard online marketing practices is that the

same advertisement frequently will be sent or distributed by multiple, distinct parties, which (as discussed below) necessarily means that multiple, different domains will be used to send the same advertisement. When

properly and accurately disclosed in headers, these domain names necessarily will be different from each other, and from that of the company advertising in the campaign.

When third parties distribute mail for a particular advertiser, they generate the "header information" (including the sending "domain") that serves as the electronic "mailing label" that accompanies the advertisement. Thus, the distributor's domain is the one that appears in the sending e-mail address. To cite a "bricks and mortar" analogy, a company that advertises in a flyer is not necessarily the same as the myriad distributors who may put that flyer into envelopes, affix a mailing label, and send the flyer (possibly with other, unrelated flyers) to targeted consumers as part of a direct mail

11

campaign. In that example, the distributors would affix the mailing labels to the outside of the envelopes, which in tum would contain their own return addresses.

Because e-mail marketing is fundamentally structured such that dozens (or even hundreds) of distinct third parties are sending e-mails on behalf of the same advertiser at the same time-and because each of these third parties is necessarily using its own domain names to identify the location of its own computer network-the use of multiple, different domain names to transmit multiple e-mail advertisements is a ubiquitous and necessary feature of the global e-commerce industry. Moreover, the same distributor will typically promote advertising campaigns for multiple different companies at the same time. (Web Marketing for Dummies,

supra, at pp. 260-61.) Therefore, the distributor's domain name may appear in the header of e-mails containing advertisements for several distinct companies, requiring the use of a generic domain.

Finally, there are other legitimate reasons for multiple domain names to be used when sending commercial e-mail: The use of different domain names can organize and route mail to different segments of the market, so as to segregate mail sent to a specific mailing list or on a specific date, or to ensure that return mail or consumer responses to specific mailings can be sorted and tracked easily. Indeed, such internal tracking is critical to ecommerce and online advertising, which rely heavily on automated technology to acquire, aggregate, and analyze highly specific information about the success of particular campaigns, the preferences of particular audiences, the performance of particular teams, and like information. (lAB Economic Value Report, supra, at pp. 18-19,21.)

12

D. Limited Availability Of Domain Names Makes It Impractical For Publishers To Use A Domain Name That Identifies The Advertiser Or The Distributor.

Plaintiff argues that "while the domain names in "Vonage's e-mail advertisements may be literally correct"-that is, they are the actual domain names used by the third parties sending the e-mail-"they still create the misleading idea that the e-mail advertisements are from multiple different sources when they are actually all from Vonage." (Opening Br. at p. 7.) This argument effectively requires that every domain used by a third-party distributor disclose the identity of the advertiser whose products are promoted in the e-mail, rather than the accurate domain of the distributor and its computer network. Not only does this ignore the function of domain names and standard industry practices described above, but such a rule would actually lead to deception where none currently exists, and would require manipulation of the distributor's true identity in favor of an advertiser's.

Moreover, a rule requiring online distributors to register to obtain domain names identifying each of the thousands of clients for which they may distribute ads would be impossible to implement. Before a party may send or receive mail from a particular domain, it must register through one of the authorized companies that serve as centralized registrars to obtain the exclusive use of that domain. (Coalition for ICANN Transparency, Inc. v. VeriSign, Inc. (N.D. Cal. 2006) 452 F. Supp, 2d 924,927-28, rev'd on other grounds (9th Cir. June 5, 2009) 2009 U.S. App. LEXIS 12514.) It is widely recognized that there is a rapidly shrinking pool of domain names available for registration. (Id. at p. 927 ["[R]ecognizable domain names are a finite

13

resource"].) Over 183 million domain names currently are registered," including every possible two- and three-character combination of letters and numbers, every English word with four letters, the most common 1,000 words in the English language, and the most common 10,000 surnames.>

In addition, most companies make a proactive effort to own and control any domain name associated with their brands (along with hundreds of seemingly "random" domains), precluding distributors from registering or using names that would identify their advertising clients. For example, UBS, the Swiss banking conglomerate, owns over 2,100 different domain

names, including "ubs.com," "ubs.net," "ubsbank.com,"

"painewebber. com," "ubspaineweb ber. com,"

"ubsglobalassetmanagement.com," "ubswealthmanagement.com," and "youandus.com," among thousands of others. (UBS Employs Holistic Approach to Online Brand Protection with MarkMonitor, available at http://www.markmonitor.com/download/cs/cs_ubs.pdf(accessed June 12, 2009); Domain Name ownership verified through a WHOIS query at http://www.whois.neti(accessed June 12,2009).)

Even if a company itself has not registered every possible variant of a domain name corresponding to its name or brands, it is likely a "domain squatter" or "typo-squatter" has. (See, e.g., Verizon California Inc. v. OnlineNIC Inc. (N.D. Cal. Dec. 19,2008) 2008 U.S. Dist. LEXIS 104516,

4 VeriSign Domain Report (June 2009), available at http://www. verisign.com/staticIDNIB _ 09 _ 0529web.pdf (accessed June 12, 2009).

. 5 Lee Gomes, All The Good Ones Have Been Taken-In Domain Names Too, Wall Street Journal (July 19,2006), available at http://online.wsj. com/article/SBI15326960876810574.html (accessed June 12,2009).

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at p. * 2 [Verizon alleged OnlineNIC registered "at least 663 domain names that are identical to or confusingly similar to [] Verizon Marks"].) For

example, "californiasupremecourt.net" is registered to ''jrv'' in South

Pasadena, Florida-an entity wholly unaffiliated with the California Supreme Court.f Thus, neither this Court nor anyone acting on its behalf could use that domain name.

The combination of a rapidly shrinking domain pool, aggressive corporate domain registration, and domain squatting make it virtually impossible for an e-mail distributor to obtain a domain that suitably identifies the advertiser or the subject matter of a particular campaign that it distributes, much less for the hundreds of different campaigns for other advertising clients which the distributor is simultaneously engaged in. For the same reasons, it would be impractical (and meaningless) to require distributors to include their own company name in each of the domains from which they send mail on behalf of others, as those names or similar names simply may not be available for registration.

Accordingly, the complexity of the e-mail marketing industry and practices surrounding domain use and registration renders plaintiffs demand for consistent and identifiable domain name use technologically infeasible and entirely unworkable.

6 See httpv/who.godaddy.com/Whols Verify .aspx?domain=californiasupreme court.net (accessed June 12,2009).

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IV. SECTION 17529.5(a)(2) DOES NOT PROHIBIT THE TRANSMITTAL OF UNSOLICITED COMMERCIAL E-MAIL ADVERTISEMENTS FROM MULTIPLE BUT ACCURATE DOMAIN NAMES, EVEN IF THE PURPOSE OR EFFECT IS TO BYPASS SPAM FILTERS.

A. Based On The Canons Of Statutory Construction, Section 17529(a)(2) Cannot Be Construed To Prohibit The Use of Multiple, Valid, And Traceable Domain Names, Even If They Bypass Spam Filters.

1. Section 17529.5(a)(2) Should Be Construed To Avoid Federal Preemption.

"[C]onstitutional considerations necessarily inform our interpretation

of the statutory language. 'If a statute is susceptible of two constructions, one of which will render it constitutional and the other unconstitutional in

whole or in part, or raise serious and doubtful constitutional questions, the court will adopt the construction which, without doing violence to the reasonable meaning of the language used, will render it valid in its entirety, or free from doubt as to its constitutionality, even though the other construction is equally reasonable. [Citations.] The basis of this rule is the presumption that the Legislature intended, not to violate the Constitution, but to enact a valid statute within the scope of its constitutional powers.' [Citation.]" (People v. Superior Court (Romero), supra, 13 Cal.4th 497, 509.)

Thus, when interpreting a statute in accordance with this rule, the Court need not decide whether a particular interpretation would actually render the statutory provision unconstitutional. Instead, "[w]hen faced with a statute reasonably susceptible of two or more interpretations, of which at least one raises constitutional questions, [the Court] should construe it in a manner that avoids any doubt about its validity." (Ass 'n for Retarded Citizens v. Dep 't of Developmental Servs. (1985) 38 Cal.3d 384, 394; In re

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Marriage Cases (2008) 43 Ca1.4th 757, 800 [interpreting California Family Code section 308.5's definition of marriage as "applicable to marriages performed in California as well as to out-of-state marriages, in order to avoid the serious federal constitutional questions that would be posed by a contrary interpretation"]; NBC Subsidiary (KNBC-TV), Inc. v. Superior Court of Los Angeles County (1999) 20 Ca1.4th 1178, 1216.)

In this case, section 17529.5(a)(2) is ambiguous. It bans any e-mail advertisement that "contains or is accompanied by falsified, misrepresented, or forged header information," but nowhere specifies what is meant by "misrepresented" header information.

However, the expansive interpretation of section 17529.5(a)(2) urged by plaintiff raises a substantial possibility that this provision would be preempted by the federal CAN-SPAM Act (15 U.S.C. § 7707(b)(I)), and thus found unconstitutional. Indeed; the State Legislature even made amendments to subdivision (a)(2) of section 17529.5 after the CAN -SP AM Act was enacted, demonstrating the Legislature's intent to enact a valid statute within the Legislature's powers.

Specifically, three months after the California Legislature enacted section 17529 et seq., Congress passed the CAN-SPAM Act, recognizing that there was a substantial federal interest in regulating commercial e-mails on a national basis and that the existing patchwork of state regulations was

. ineffective. (15 U.S.C. § 7701(a)(II, (b)(I).) In particular, Congress found that because "an electronic mail address does not specify a geographic location, it can be extremely difficult for law-abiding businesses to know with which of these disparate statutes they are required to comply." (I5 U.S.C. § 770 1 (a)(I 1).) To ensure American businesses had clear and, uniform guidance on the requirements applicable to commercial e-mail

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advertising, Congress included in the CAN-SP AM Act an explicit provision preempting all state laws "expressly regulating the use of electronic mail to send commercial messages, except to the extent that any such statute, regulation, or rule prohibits falsity or deception in any portion of a commercial electronic mail message or information attached thereto." (15 U.S.C. § 7707(b)(1).)

Following the enactment of the CAN-SPAM Act, as pointed out by Vonage (Ans. Br., p. 21), the State Legislature amended section 17529.5(a)(2) to remove the word "obscured" from the types of information prohibited in a header in recognition that such a prohibition was now preempted, because it was not directed squarely to "falsity or deception." (Stats. 2004, ch. 571, § 1; Sen. Floor Analysis of Sen. Bill No. 1457 (2003- 2004 Reg. Sess.) Aug. 18,2004, p. 2.) Accordingly, not only is the Legislature presumed to have intended, but it did intend, to enact a valid statute within the scope of its constitutional powers in light of the CANSPAM Act's preemptive effect on state law. (See People v. Superior Court (Romero), supra, 13 Ca1.4th at p; 509.)

Accordingly, to "avoid[] any doubt about [the] validity" of section 17529.5(a)(2) (Association/or Retarded Citizens, supra, 38 Ca1.3d at p. 394), "falsified, misrepresented, or forged header information" within the meaning of section 17529.5(a)(2) must be construed to prohibit only common law concepts of falsity or deception arising from the contents of a particular e-mail for the following reasons:

First, the CAN-SP AM Act preempts any state statute expressly regulating "the use of electronic mail to send commercial messages, except to the extent that any such statute ... prohibits falsity or deception in any

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portion of a commercial electronic mail message." (15 U.S.C. § 7707(b)(I).)

Second, the clear majority of courts in California and elsewhere have held that the CAN-SP AM Act "left states room only to extend their traditional fraud prohibitions and deception prohibitions into cyberspace," such that a plaintiff asserting claims under section 17529.5 or similar state statutes must prove the elements of common law fraud or deceit in order to avoid preemption. (Omega World Travel, Inc. v. Mummagraphics, Inc. (4th Cir. 2006) 469 F. 3d 348,353-56 [CAN-SPAM Act preempts state statutes that reach "beyond common law fraud or deceit."]; Hoang v. Reunion.com, Inc. (N.D. Cal. Dec. 23, 2008) 2008 U.S. Dist. LEXIS 103659, at p. *6 ["Courts ... have interpreted "falsity or deception," as used in 15 U.S.C. § 7707(b)(I), to refer to the common law tort of misrepresentation or fraud"]; Hoang v. Reunion.com, Inc. (N.D. Cal. Oct. 6, 2008) 2008 U.S. Dist. LEXIS 85187, at p. *4 [dismissing suit for failure to "allege that any violations of [section 17529.5] occurred under circumstances that would support a claim for common law fraud or deceit"]; ASIS Internet Services v. Optin Global, Inc. (N.D. Cal. Apr. 29, 2008) 2008 U.S. Dist. LEXIS 34959, at p. *58 [CAN-SP AM Act "permits state law to regulate the use of electronic messages only to the extent those regulations are based on traditional principles of fraud"]; Kleffman v. Vonage Holdings Corp. (C.D. Cal. May 22,2007) 2007 U.S. Dist. LEXIS 40487, at p. *4.)

Although a few courts interpreting section 17529.5(a)(2) have held a showing of common law fraud is not required, the majority view should be adopted to avoid doubt about the validity and constitutionality of the scope of section 17529.5(a)(2). Moreover, even those courts recognize that at a minimum, claims must arise from "materially false or deceptive

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representations" contained in the e-mail itself that are likely to deceive actual consumers. (See, e.g., Asis Internet Servs. v. ConsumerBargainGiveaways, LLC (N.D. Cal. Apr. 17,2009) 2009 U.S. Dist. LEXIS 36523, * 18 [CAN-SPAM Act's savings clause permits state law fraud claims, as well as claims based on "materially false or deceptive representations" in commercial e-mails]; Asis Internet Servs. v. Vista print United States, Inc. (N.D. Cal. May 5, 2009) 2009 U.S. Dist. LEXIS 41384, * 9- * 10 [The phrase "falsity and deception" applies "more broadly than just to common-law fraud claims" and includes "a material representation, omission, or practice that is likely to mislead consumers acting reasonably"].)

In any event, even this broader interpretation of permissible state statutes under the CAN-SPAM Act would not permit plaintiffs interpretation that section 17529.5(a)(2) prohibits the use of multiple, random, or nonsensical domain names for the purpose of bypassing spam filters: A random or nonsensical name that is a valid domain name owned by the party using it is not false or likely to materially mislead consumers. Indeed, plaintiff is not actually complaining about a false or deceptive representation in "any portion of the contents of a commercial electronic mail message," but instead, challenges a practice of sending e-mails using different domain names.

Conversely, were this Court to find that section 17529.5(a)(2) prohibits the use of multiple, accurate domain names-where it is undisputed that the header information in specific e-mails is not false or deceptive in and of itself-there is a substantial likelihood that the provision would be deemed unconstitutional. However, "[s]tate and federal laws should be accommodated and harmonized where possible so that

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preemption can be avoided." (Cal. ARCa Distribs., Inc. v. Atl. Richfield Co. (1984) 158 Cal.App.2d 349,359; see also Unocal Corp. v. Kaabipour (9th Cir. 1999) 177 F.3d 755, 769 [interpreting competing statutes in accordance "with the respectful approach of generally interpreting and applying legislation by harmonizing state and federal statutes where possible so as to avoid finding preemption"].)

Accordingly, to avoid any doubt about the constitutionality of section 17529.5(a)(2), this Court should reject plaintiffs expansive interpretation.

2. Review Of The Entire State Statutory Scheme Also Demonstrates That Section 17529.5(a)(2) Focuses On Deception In Specific E-mails, NotOn The Use Of Multiple Domain Names To Bypass Spain Filters.

"[I]n construing a statute, the task of the court is to determine

legislative intent; in doing so, the court should utilize those tools of interpretation that most clearly illuminate the legislative object. [~ One 'elementary rule' of statutory construction is that statutes in pari materiathat is, statutes relating to the same subject matter-s- should be construed together. [Citation.] [The courts] have long recognized the principle that even though a statute may appear to be unambiguous on its face, when it is considered in light of closely related statutes a legislative purpose may emerge that is inconsistent with, and controlling over, the language read without reference to the entire scheme of the law." (Draeger v. Friedman, Sloan & Ross (1991) 54 Ca1.3d 26, 50.) In short, "[t]he words of the statute must be construed in context, keeping in mind the statutory purpose, and statutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible."

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(Dyna-Med, Inc. v. Fair Employment & Housing Com., supra, 43 Ca1.3d at p. 1387.)

Plaintiff is correct that in enacting thestatutory scheme to restrain unsolicited commercial e-mail advertisers (§ 17529 et seq.), the California Legislature was concerned about the quantity of unsolicited commercial email and the methods used to send such e-mails. (Opening Br. at pp. 21- 23.) However, these concerns were not addressed by section 17529.5(a)(2). Instead, the issue oflarge quantities of unsolicited commercial e-mails was addressed by other statutory sections in the broader statutory scheme.

Section 17529.2 sought to address the overall volume of commercial e-mail by purporting to institute an absolute bar on any and all unsolicited commercial e-mail advertisements sent from California or to a California electronic mail address. (§§ 17529.2,subds. (a). & (b).) (This provision may not have survived a First Amendment challenge had it not been preempted by the CAN-SPAM Act.)

Separately, section 17529.4 sought to address mailing practices that use multiple, random domain names to increase mail volume, by making it unlawful "for any person to use scripts or other automated means to register for multiple electronic mail accounts" for the purpose of "initiat[ing] or advertis[ing] in an unsolicited commercial e-mail advertisement."

(§ 17529.4, subd. (c), italics added.) Significantly, this statute addresses the practice that plaintiff now (incorrectly) contends violates section 17529.5(a)(2).

In light of the concurrent enactment of sections 17529.2 and 17529.4, section 17529.5 (the statute at issue here) should not be construed-at substantial risk of preemption-to address what the former statutes addressed. Instead, "[i]t is the duty of this court to harmonize statutes on

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the same subject," giving them distinct meanings. (Draeger v. Friedman, Sloan & Ross, supra, 54 Ca1.3d at p. 52.) As shown in the next section, the text of section 17529.5, subdivision (a), demonstrates that it was intended to address false and deceptive information contained in the header (including the subject line) of specific e-mails, not the use of multiple domain names in

different e-mails. (§ 17529.5, subds. (a)(I)-(3).).

And although sections 17529.2 and 17529.4 are now preempted by the CAN-SPAM Act, that does not change the legislative intent reflected by the concurrent enactment of those sections along with section 17529.5. In short, the subsequent federal preemption of sections 17529.2 and 17529.4 cannot expand the prior intent underlying the enactment of section 17529.5.

Moreover, the State Legislature subsequently acknowledged that

. although never officially repealed, sections 17529.2 and 17529.4 are now preempted. (Sen. Com. on Bus. & Prof., Analysis of Sen. Bill No. 1457 (2003.;2004 Reg. Sess.) Apr. 12,2004, p. 4 ["There are two sections that are being left in existing law even though those provisions are preempted. Those sections are Business and Professions Code §§ 17529.2 and

17529.4"].)7

At the same time that the Legislature acknowledged the aforementioned preemption, it deleted the word "obscured" from the types of prohibited header information in recognition that the prohibition of "obscured" header information also was preempted. (See ante, p. 18.)

7 Available at http://www.leginfo.ca.gov/pub/03-04!hill/sen/sb_1451- 1500/sb 1457 cfa 20040413 092548 sen comm.html.

- - - - --

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Significantly, at that same time, the Legislature also deleted a provision from an amendment to Section 17529.5 that would have prohibited the registration of "multiple e-mail addresses" for use in sending unsolicited advertisements-confirming its understanding that section 17529.5 is limited to actual falsity and deception in specific e-mails and does not encompass the types of general sending practices the Court has been asked to consider in this case. (Sen. Floor Analysis of Sen. Bill No. 1457 (2003-2004 Reg. Sess.) Aug. 18,2004, p. 2.)8

3. The Plain Meaning Of Section 17529.5(a)(2) Demonstrates That It Only Prohibits Falsified, Misrepresented, And Forged Header Information Intended To Deceive Recipients.

In determining the Legislature's intent in enacting section

17529.5(a)(2), "a court must look ... to the words of the statute themselves, giving to the language its usual, ordinary import and according significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose." (Dyna-Med, Inc. v. Fair Employment & Housing Com., supra, 43 Ca1.3d at pp. 1386-1387.)

In contrast to the two preempted provisions discussed above, subdivision (a)(2) of section 17529.5, and its accompanying subdivisions (a)(I) and (a)(3), focus exclusively on whether a particular e-mail contains false information that would deceive the recipient-not on broader mailing practices or overall mail volume.

Section 17529.5, subdivision (a)(1) prohibits e-mail advertisements that contain or are accompanied by "a third-party's domain name without

8 Available at http://leginfo.public.ca.gov/pub/03-04lhiU/sen/sb_1451- 1500/sb 1457 cfa 20040818 164840 sen floor.html.

- - - - -

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the permission of the third party." This provision prohibits a practice that would deceive recipients into believing that a particular e-mail is attributable to an unaffiliated third party, by using a domain name registered to that third party without permission. For example, if an unscrupulous company were to send e-mail advertisements for counterfeit jewelry from an

, e-mail address containing the domain "tiffany. com" (which is owned by Tiffany & Co.), this could dupe recipients into thinking that the products were Tiffany products and would violate the plain language of section 17529.5, subdivision (a)(l).

Second, to protect consumers from being fraudulently induced to open e-mail by deceptive subject lines, section 17529.5, subdivision (a)(3), makes it unlawful to send a commercial e-mail advertisement containing a subject line that is "likely to mislead a recipient, acting reasonably under the circumstances, about a material fact regarding the contents or subject matter of the message." (§ 17529.5, subd. (a)(3), italics added.) Thus, a subject line suggesting that an e-mail message is from a friend or social acquaintance (e.g., "great to see you last night!"), when the body of the email message contains a commercial solicitation from a complete stranger, would violate section 17529.5, subdivision (a)(3).

Finally, section 17529.5(a)(2)-the section at issue here-prohibits "falsified, misrepresented, or forged header information." In the same vein as its sister provisions concerning the use of misleading subject lines and misappropriated third-party domain names, subsection (a)(2) focuses on "falsified, misrepresented, or forged" information that could deceive the recipient into acting upon an e-mail in some fashion.

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In construing the usual, ordinary import of the words in section 17529.5(a)(2), a number of limitations on that interpretation should first be noted:

First, subdivision (a)(2) is directed solely to "header information."

The "header" is the electronic equivalent of a "mailing label" and includes the same types of information that would be found on the outside of an envelope-Le., the address of the mailbox and machine(s) that sent the email (i.e, "From" line), and the address of the recipient(s) (Le. "To" line). (See 15 U.S.C. § 7702(8) [defining "header information" for CAN-SPAM Act].)

Second, by its own terms, section 17529.5(a)(2) relates exclusively to false, misrepresented, or forged header information in "a commercial e-mail advertisement" either sent from California or sent to a California electronic mail address (§ 17529.5, subd. (a)), and not to broader mailing practices. Yet, it is the broader mailing practice of using different domains about which plaintiff complains here-Le., the mechanics of how group e-mails are sent, not the content of a particular "commercial e-mail advertisement."

With those limitations in mind, "'the plain meaning of the actual words of the law'" should now be examined. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Ca1.4th 728, 733.) The three terms, "falsified, misrepresented, or forged," contained in section 17529.5(a)(2) describe related, though decidedly distinct, types of deceptive information that can be contained in e-mail "header information"-each involving a false statement of fact.

Significantly, plaintiff's argument rests on the assertion that the way in which multiple e-mails are sent can also be "misleading," even if the contents of each e-mail are true and accurate. By doing so, plaintiff

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conflates "misleading" with "misrepresented" and urges an erroneous interpretation of section 17529.5(a)(2) that does not require falsity or deception in the contents of the e-mail itself.

Turning to the specific terms, "falsify" is commonly defined as "[t]o make false by altering or adding to" or "to counterfeit." (Webster's II New College Diet. (2001) p. 404.) Thus, "falsified" header information is information that is entirely fabricated, such as a "from" address that contains a non-existent e-mail account, thus preventing the recipient from contacting the e-mail sender. (See, e.g., Software Design & Application,

Ltd. v. Hoefer & Arnett, Inc. (1996) 49 Cal.App.4th 472,476-77 ["The partnership does not exist. McDonald presentedfalsifted papers identifying himself as general partner of this fictitious partnership and SDA as one of its limited partners, and designating himself as sole signatory on both accounts"], italics added.)

By contrast, theterm "forged" applies to the use of actual, existing information (such as an actual domain name or e-mail address) by someone who is not the owner or authorized user of that information. For example, if someone other than Steve Jobs were to send an e-mail from Steve Jobs'

. e-mail address Ie.g .• stevejobs@apple.com). that would constitute "forged" header information under section 17529.5(a)(2), even if the sender was authorized to use the apple.com domain. (See, e.g., People v. Mitchell (2008) 164 Cal.App.4th 442,457-58 [Defendant caregiver convicted of numerous forgery counts, including two counts for "forging Barbara C.' s signature to [] Mervyn's charge receipt"]; People v. Ryan (2006) 138 Cal.App.4th360, 363-64 ["[A]ppellant was convicted of forgery ... based on her conduct of signing Cynthia Carter's name to a check and using it to make a purchase at Staples"].)

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Finally, the term "misrepresented" can cover information that is neither falsified (i.e., nonexistent) nOr forged (i.e., misappropriated), but that nonetheless constitutes a false representation made with the intent to deceive. Black's Law Dictionary defines "misrepresentation" as "[t]he act of making a false or misleading assertion about something, usually with the intent to deceive." (Black's Law Diet, (8th ed. 2004) p. 1022.) For example, if the registered owner of the domain name "californiasupremecourt.net" sent an e-mail from "jon@californiasupremecourt.net" with the subject line "Court Order," this would constitute "misrepresented" header information in violation of section 17529.5(a)(2). Because the domain "californiasupremecourt.net" actually exists, it would not be "falsified," and because this hypothetical assumes the domain is owned by the sender, it would not be "forged." Nevertheless, because the sender is unaffiliated with the California Supreme Court and has included that domain name for the purpose of falsely representing to the recipient that the e-mail was sent by someone who is affiliated with the California Supreme Court, the domain name would constitute "misrepresented" header information under section 17529.5(a)(2).

Likewise, an e-mail subject line (which is part of the "header information") that falsely states "You have just won $1 million dollars!" would not be "falsified" or "forged," but would nonetheless contain a false statement of fact in violation of section 17529.5(a)(2). (To the extent that such a subject line accurately disclosed the subject matter of the corresponding message, it would not violate section 17529.5, subdivision (a)(3), which applies when a subject line is "likely to mislead a recipient" as to "the contents or subject matter of the message." (§ 17529.5, subd. (a)(3).))

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Thus, the terms, "falsified, misrepresented, or forged" may overlap, but "misrepresented" is not surplusage. Conversely, the definition of "misrepresented" does not make the other two terms surplusage as "misrepresented" may not cover a "falsified" or "forged" domain name (or

other header information) that does not exist or has been misappropriated, but does not necessarily mislead. In any event, these terms do not cover commercial e-mails with accurate but random and nonsensical domain

names, simply because the domain names may allow multiple e ... mails sent from those domains to bypass a spam filter that tracks mail volume, as shown in the next section.

4. Accurate And Traceable Domains Cannot Constitute "Falsified, Misrepresented, Or Forged Header Information."

When properly construed as set forth above, section 17529.5(a)(2) could never encompass the use of multiple, accurate domain names, even if the domains were used to (or had the effect ot) "bypassing" spam filters. Critically, plaintiff concedes that each of the domains in the challenged emails is "literally correct" and fully "traceable" to the actual third-party affiliate that sent the mail. (Opening Br. at p. 7.) Thus, plaintiff cannot prove (as he must) that any e-mail contained "header information" that was "falsified, misrepresented, or forged," as required to support liability under section 17529.5(a)(2): the domains are not "falsified" (because they are real, registered domains), and they are not "forged" (because the domains are owned by the third parties who sent the e-mails). Nor could these domains possibly be deemed "misrepresented." None ofthese domains purport to convey any information to the consumer at all, much less information that is materially false or misleading. This is not a case where a company sent an e-mail from the domain

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"youhavewonamilliondollars.com" or "californiasupremecourt.net," with the intent to deceive the recipient. To the contrary, a consumer who received an e-mail from domains like "mycomputersite.com" or "urgrtquirkz.com" would make no association with such generic names, but the recipient's computer would have accurate information about where to route any reply e-mail sent in response to such e-mails. In fact, if the distributors sending the challenged e-mails had used domain names other than those owned by them and corresponding to the machines that sent the e-mails-including a domain identifying Vonage-the domains would not have accurately identified the distributors, and would thus run afoul of section 17592.5(a)(2).

Plaintiff also can cite no legal support for his contention that a domain name that fails to identify the advertiser or its product is "random" and therefore "misrepresented." To the contrary, a Washington District Court expressly rejected this very argument in a case asserted under Washington's analogous state anti-spam law less than two weeks before the Central District of California issued its decision in this case. In Gordon v. Virtumundo, Inc. (W.D. Wash. May 15,2007) 2007 U.S. Dist. LEXIS 35544, *35, plaintiffs challenged defendant's practice of sending e-mails from domains such as "vm-mail.com" because the "'from line' does not include Defendants' company names or the names of company personnel." (Id. at p. *35.) As in this case, the Gordon plaintiffs conceded that the domains were registered and fully traceable to the defendant, and that consumers need only look up the domains in an online "whois" database to identify the defendant as the sender of the e-mails. (Id. at p. *38.) Nevertheless, plaintiffs argued "that this extra step should not be required from consumers." (Id. at p. *39.) The District Court disagreed, refusing to

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declare "'from addresses' ending with a domain that facilitates an accurate identification of Defendants could in any sense be found 'false' or 'deceptive. '" (ld.)

By contrast, the two cases cited by plaintiff are clearly distinguishable on the grounds that the multiple domains at issue there were not accurately traceable to the individuals responsible for sending the commercial e-mails.InUS.v.Kilbride(D.Ariz. 2007) 507 F. Supp. 2d 1051, the district court upheld criminal convictions under the CAN-SP AM Act based on defendants' initiating of e-mails from over 200 frequently changing domain names that "were then registered to a Mauritius company which had a bogus contact person and phone number." (ld. at p. 1064, italics added.) Although the Kilbride court rejected defendants' claim "that the header information was not false because it accurately led to Ganymede, the true registrant of the domain names," plaintiff wrongly implies that the court's decision was based on the "random" and "nonsensical" nature of those domains. (Reply Br. at pp. 21-22.) Instead, the court rejected this defense because Ganymede, itself, was a dummy corporation designed to further conceal the Defendants' identities. (Kilbride, supra, 507 F. Supp. 2d at p. 1065.) Plaintiff makes no such accusations here.

Plaintiffs reliance on the unpublished district court opinion in Silverstein v. E360Insight, LLC (C.D. Cal. Oct. 1,2007) No. CV-07-2835-

. CAS, *4-*5 (Opening Br., Attachments at pp. 31-32) is equally misplaced.

In Silverstein, the court refused to dismiss plaintiffs section 17529.5 claims that alleged, among other practices, the use of multiple domain names for the purpose of deceiving spam filters. Contrary to plaintiffs contention, however, that case involved different allegations from those asserted here. (Opening Br. at p. 17.) Most notably, the court emphasized that the

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Silverstein plaintiffs alleged that certain domains in the e-mails were deceptive because they "purported to identify the sender of the e-mail, but failed to do so." (Silverstein, No. CV-07-2835 at p. *4, Opening Br., Attachments at p. 31.) No such allegation is made here. Instead, plaintiff argues that the domains at issue are "nonsensical," although he admits they are "literally correct" and "traceable;' to the senders of the e-mails. (Opening Br. at p. 7.)

Unable to point to any misrepresentation contained in the "header information" of the e-mails in this case, plaintiff alleges only that the mailers' purported practice of using different domains that accurately reflect the diversity of the sending domains somehow would "mislead" computer "spam filters" that may filter mail based on the volume of e-mail from particular domains. Plaintiff s entire argument is thus directed to broad mailing practices, and the purported impact that multiple, accurate e-mails (sent on different days over a period of three weeks) might have, in the aggregate, on automated filter technology.

But this does not establish a claim under section 17529.5(a)(2).

Simply put, the supposedly "misleading" conduct about which plaintiff complains does not result from any misrepresentation contained in the "header information" of an e-mail, and instead is alleged to result from the overall effect of different valid domain names on hypothetical filter software programmed by an ISP to block high volume e-mail traffic. But a computer filter can never be "misled" by an accurate but "nonsensical" domain name, because the domain would serve to accurately identify the location of the sending machine-the only function of a "domain" from the standpoint of a computer.

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Because plaintiff can point to nothing that is "falsified, misrepresented, or forged" in the "header information" of a single e-mail,

plaintiffs theory cannot form the basis ofa claim under section 17529.5.

V. PLAINTIFF'S EFFORT TO IMPOSE A RULE THAT WOULD PROHIBIT THE USE OF "RANDOM" OR "NONSENSICAL" DOMAINS WOULD RESULT IN AN .

ILLOGICAL AND UNWORKABLE STANDARD.

A. No Workable Standard Exists For Determining Whether A Domain Name Is "Random" Or "Nonsensical."

Plaintiff s proposed rule, if adopted, would require a court or jury to

evaluate whether a particular domain name is "random" or "nonsensical" in

order to determine whether the use of multiple such domains violates

. section 17529.5(a)(2). Tellingly, plaintiff does not articulate any standard that could guide this determination, and the realities of domain usage and availability coupled with standard Internet practices would preclude any objective or consistent standard from being applied. Determining whether a

domain name is sensible, nonsensical, random, or non-random is so

subjective as to make the inquiry meaningless. For example, Google.com today is a household name, but ten years ago "google.com" would likely

have been considered "nonsensical."

As described previously, the selection of a domain name is entirely within the discretion of the registrant, and it is common for large, reputable companies to own and use hundreds of seemingly "random" or "nonsensical" domain names, for myriad reasons - names that plaintiff s rule would declare "deceptive." For example, in addition to the well-known Google.com, Google, Inc. also owns 30dayfitness.com, 466453.com,

apsem.com, bayareaburritos.com, checkoutsucks.com, deja.net, dontswitch.com, foofle.com, gmmgjd.net, and mariolovespasta.com, to

33

name only a few. Apple, Inc. owns, among others, buy-different.com, carbon.com, desktopmovie.com, mammals.org, ripmixburn.com, publishingsurvey.com, and kts-af.net. Staples, Inc. has a domain portfolio that includes sws-testing.com, sna-cab.com, kensiko.com, bureauengros.com, and smallbizreward.com.?

Moreover, due to a rapidly shrinking pool of available domain names, many companies seeking to acquire domains may have little choice but to select one that is seemingly "random," because nothing "sensical" or "non-random" is available. Each new company seeking to establish an Internet presence faces increasing difficulty in finding a domain name that fits its business, and companies are frequently forced to tailor their business's name to an available domain. In 2007, for example, the following websites went live: Doostang.com, Wufoo.com,

Bliin.com, Thoof.com, Bebo.com, Meebo.com, Meemo.org, Kudit.com, Raketu.com, Etelos.com, Iyogi.net, Oyogi.com, Qoop.com, Fark.com, Kijiji.com, Zixxo.com, Zoogmo.com.l'' The "shortage of marketable domain names has forced businesses and other groups to opt for less-thandesirable alternatives." (Corilyn Shropshire, Web is no bottomless pit/or dot. com name seekers, Pittsburgh Post-Gazette (Aug. 16,2006) available at http://www.post-gazette.com!pgl062281713810-96.stm (accessed June 12, 2009).)

9 Ownership of each domain name was verified through a series of WHOIS queries at http://www.whois.net (accessed June 12,2009).

10 David Pogue, The Dr. Seuss Jumble: Naming Websites, N.Y. Times (Dec. 6, 2007) available at http://www.nytimes.com!2007112/06/ technology/personaltechl06pogue-e-mail.html (accessed June 12,2009).

34

Thus, a requirement that any e-mail sent must come from a domain that is in some way "sensical" would lead to the very nonsensical result that the use of these or other seemingly random domain names owned by legitimate companies would violate the law. Advertisers, distributors, and even casual e-mail senders (of "commercial e-mail advertisements," as

broadly defined by Section 17529.1, subdivision (c)) would face tremendous uncertainty about whether their actions run afoul of this undefined standard. The inevitable result would be litigation and its associated costs-both to legitimate companies, and to California courts, which would be endlessly mired in fact-intensive and amorphous inquiries to determine whether particular domain names "make sense.t'U

B. Plaintiff Ignores The Fact That ISP Filters Apply Widely Varying and Undisclosed Criteria, Unrelated To Whether "Header Information" Is "Falsified, Misrepresented, Or Forged."

Plaintiff s argument rests on the flawed and unsupported contention that the use of multiple, accurate domains "misleads" unspecified spam filters "prior to [the e-mails] being received and/or opened by the recipient."

11 Moreover, plaintiffs emphasis is on whether the domains at issue are "random" or "nonsensical" is not relevant to the question certified to this Court because the ISP filters posited by plaintiff do not distinguish between "random" or "nonsensical" and "nonrandom" or "sensible" domain names. Plaintiff asserts only that ISPs consider the overall volume of mail originating from a particular domain-a metric that would be applied to any domain, regardless of its "random" or "nonsensical" nature. According to plaintiffs theory, a mailer could evade ISP's filters using the very multiple domain names that plaintiff argues are not deceptive, such as "anaheimangels.com," "angelsbaseball.com," "losangeles.angels.mlb.com," and "angels.mlb.com." (See Reply Br. at p. 9.)

35

(Reply Br. at p. 13.) In essence, plaintiff seeks to dramatically expand the scope of section 17529.5(a)(2}-which is focused on deceptio!l to a recipient caused by "falsified, misrepresented, or forged header information"-to encompass accurate mailing practices that might impact the undisclosed algorithms of an ISP's computer filters.

Specifically, the various filters employed by ISPs exist solely to further the business objectives of the ISPs, and make no assessment about whether a particular e-mail contains "falsified, misrepresented, or forged

header information" as defined in Section 17529.5(a)(2). As plaintiff concedes, computers are not capable of assessing whether a domain is owned by the sending party, whether the header information has been "falsified, misrepresented, or forged," or whether the subject line accurately disclosed the subject matter of the message-the only inquiries relevant to section 17529.5. (See Opening Br. at p. 15.)

Furthermore, in addition to widely known ISPs like AT&T, Comcast, and AOL, thousands of ISPs provide mail services to individual and business clients. (lAB Economic Value Report, supra, at p. 15.) Some ISPs elect to employ broad-based computer "filters" that rely on highly technical algorithms developed by the ISP to screen potentially unwanted mail before delivering particular e-mails to end users. 12 For obvious reasons, the details of how a particular ISP's filters work are a closely guarded and everchanging secret, and the criteria used to filter e-mail varies widely from ISP

12 Federal Trade Commission Spam Summit Staff Report (Nov. 2007), available at http://www.fic.gov/os/2007/12/071220 spamsummit report.pdf(accessed June 12,2009) ("One panelist reported that 71 percent of email users utilize filters provided by their email service provider or employers, up from 65 percent two years ago.").

36

to ISP. Moreover, filter technology is constantly evolving and improving, and the undisclosed criteria applied by filters is constantly changing. 13 Additionally, it is well established that ISP's filters are inherently imperfect and frequently block non-commercial e-mail or e-mail advertisements that would be desirable to (or were specifically requested by) the recipient. 14

Accordingly, in light of undisclosed, imperfect, and rapidly evolving filter technology, it would be difficult to know whether or not a particular mailing practice (such as the use of multiple, accurate domains) in fact resulted in a particular ISP'sfilter being "bypassed," even if that was the apparent purpose for the practice. Conspicuously, plaintiff cites no support whatsoever for his claim that the practice challenged here operated (or even could operate) to "mislead" even a single filter, and given the highly sophisticated nature of filter technology, it is highly unlikely that mail sent from different sending domains-if sent from a single source-would throw off the technology employed by most ISPs, which coulduse the numerical

13 Tom Zeller, The Fight Against Vl@gra (and Other Spam), NY Times (May 21,2006), at sec. 3, page 1.

14 Kim Peterson, Spam Wranglers, Seattle Times, at C1, June 16,2003, ("No technology is perfect, which leads to one of the biggest problems in filtering spam: false positives, or legitimate e-mail accidentally labeled as spam. That's why many anti-spam programs put spam into a separate folder, one that an e-mail user must look through for mislabeled mail"); Rebecca Aronauer, Are You Taking E-Mail Seriously? Sales & Marketing Management Magazine, August, 2007 ("These false positives can be more harmful than a spam-filled inbox, especially when an e-mail from a new client gets lost in the junk folder. Thirty-six percent of people surveyed have lost business to e-mail").

37

"IP address" of the sending machine(s) to determine that the e-mails come from the same or a related computer. 15

Thus, because ISP filters apply criteria that are wholly unrelated to the standard set forth in section 17529.5(a)(2), it would be wholly unjustand dangerously disruptive-to require mailers and the millions of companies who advertise through e-mail to avoid practices that may be inferred to have the purpose of "bypassing" the undisclosed standards applied by particular ISP filters, or face steep liquidated damages under section 17529.5.

VI. PLAINTIFF'S SWEEPING RULE WOULD CRIPPLE A LEGITIMATE MULTI- BILLION DOLLAR INDUSTRY.

F or the above reasons, if the Court holds that the use of multiple domains which are accurate and traceable to the sender of an e-mail

advertisement constitutes "false, misrepresented, or forged" header

information, it would dramatically impact a multi-billion dollar a year (and rapidly growing) online advertising industry engaged in lawful and wellestablished e-mail practices. Online advertising is the fastest growing advertising medium, generating over $24 billion in revenues in 2007, over $1 billion of which was directly linked to e-mail marketing. (See lAB EconomicValue Report, supra, at p. 27.)16 As of2008, online advertising

IS An "IP address" is the numerical equivalent of a "domain name." Each computer has a unique IP address, but multiple domain names may be assigned to a single IP address. For example, "nike.com," "justdoit.com" and "airjordan.com" all resolve to the same IP address: 66.54.18.30.

16 As of2007, it was estimated that 141,108 individuals were employed by the Internet advertising industry, of which more than 10,000 were

[F ootnote continued on next page]

38

surpassed radio and Yellow Pages as marketing vehicles and is "in a close tie with magazines to be the third biggest advertising medium in the US." (Id. at p. 23.)17 The appeal and effectiveness of e-mail marketing has been widely documented:

E-mail marketing is universal. [A]ccording to a recent Forrester study, 97 percent of consumers and 94 percent of marketers use it. Click-through rates on e-mail marketing messages are around 5 percent, which is a high rate for direct marketing and an indication of the high relevancy of these programs to consumers.

(Id. at p. 22.)

Plaintiffs rule would effectively require e-mail distributors to use the same domain name as each other, or the hundreds of different advertisers for whom they disseminate campaigns. For the reasons described above, such a

rule would be unworkable and would actually result in deceptive and unlawful practices, causing the global internet advertising industry to collapse, and preventing millions of companies from promoting products and services through this highly effective advertising medium. Because the

,"

Internet has no boundaries, the detrimental effects of such a ruling would not be limited to California. Curtailment of the use of multiple, accurate

[Footnote continued from previous page]

directly affiliated with e-mail marketing, translating to more than $300 billion-or approximately 2% of the GDP-in total economic impact. (Id. at pp. 4, 27) These numbers are likely higher today.

17 See also PriceWaterhouseCoopers, Global Entertainment and Media Outlook: 2008-2012, Executive Summary, at p. 36 [reporting that Internet advertising "rose by 33.2 percent, the fastest-growing segment in 2007 and the fourth consecutive increase in excess of 30 percent" and forecasting that Internet advertising will continue to be the "fastestgrowing segment during the next five years," becoming a $120 billion per year industry by 2012].

39

domains to send commercial e-mails would dramatically impact global marketing practices and would create uncertainty and insurmountable hurdles in the path of legitimate e-marketing firms and the blue chip companies they represent-precisely what Congress intended to avoid when it enacted the express preemption provisions of the CAN-SPAM Act. The impact on California would be especially deep, however, because, by its terms, section 17529.5 applies to all commercial e-mail "sent from California" senders. (§ 17529.2, subd. (a).) Plaintiffs unsupported rule would therefore likely result in a mass exodus from the state of e-marketing firms (as well as thousands of California companies that rely principally on Internet advertising to promote their products and services), taking with them thousands of California jobs and millions of dollars of tax revenue. (See lAB Economic Value Report, supra, at pp. 43-44, 50.)

VII. CONCLUSION

For all of the foregoing reasons, amici respectfully request that the question certified by the Ninth Circuit be answered in the negative.

Dated: June 15, 2009

GIBSON, DUNN & CRUTCHER LLP Daniel M. Kolkey, SBN 79102

S. Ashlie Beringer

Michael B. Smith, SBN 235764 Benjamin M. Glickman, SBN 247907

Attorneys for Amici Curiae

Email Sender and Provider Coalition and ValueClick, Inc.

40

CERTIFICATE OF WORD COUNT

Counsel for Amici Curiae hereby certifies that this Brief of Amici

Curiae utilizes a 13-pointTimes New Roman typeface and contains 10,617

words, including footnotes, but excluding the Cover Page, Table of

Contents, Table of Authorities, Certificate of Word Count, and Declaration

of Service, as counted by the word processing software used to create the

brief.

Dated: June 15,2009

Attorney for Amici Curiae

Email Sender and Provider Coalition and ValueClick, Inc.

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Index to Attachments

Attachment Permitted by Rule Page(s)
Excerpts from Hamilton Consultants, Inc., CRC 8.S20(h) 1-10
lAB Economic Value of Advertising-
Supported Internet Ecosystem (2009) Case No. 8169195

Amicus Brief of ESPC & ValueClick, Inc.

Attachment Page 1

iab.

Economic Value of the AdvertisingSupported Internet Ecosystem

June 10, 2009

Authored by

Hamilton Consultants, Inc.

With

Dr. John Deighton, Harvard Business School, and

Dr. John Quelch, Harvard Business School

Case No. S169195

Amicus Brief of ESPC & ValueClick. Inc.

Attachment Page 2

offer web hosting services, at least for simple one-page web sites put up by individuals. Sophisticated web hosters like Akamai also offer caching capability in different parts of the country for very large Internet players, such as Google, Amazon, and the major media sites, in order to relieve bandwidth limitations that would arise if these sites were accessed out of just one data center. Backup hosting is also important for data security and disaster recovery. Uptime performance is an extremely important aspect of web hosting, because all owners of web sites have a fear of their sites going down and being inaccessible to customers and website visitors. For some e-commerce companies, one day of downtime could mean $1 million or more of lost orders.

6. Search Engines Portals: Search engines have become a vital part of the Internet user's experience, since they offer an easy, user-friendly way to find information on about any topic. The early beginnings of search capability in the 1990s were confined to just searching the directories of web pages, not the text on individual pages. Then, companies like Aliweb, Webcrawler, Lycos,and Infoseek created the capability to index the text of entire web pages, thus making them searchable. In the late 1990s, the industry saw a proliferation of search engines, including the rise of a new player, Google. Around 2000, Google offered an innovation, PageRank, which ranked web pages in search results according to their value, as measured by the number of links to them from other websites. Also Google focused on being a pure search company, whereas the search engine at Yahoo was embedded in its portal offerings. Portal companies offer the user organized content and links to deeper information within and outside the portal. Some are general portals, like AOL and Yahoo, and some are very specific to an area ofinterest, like WebMD and One Source. But no

. portal offers the user the comprehensive access to information that today's general search engines do.

f

7. Content Sites: Here, informational and educational content sites are distinguished from search

engines/portals and e-commerce sites, even though all could, in one sense, be classified as content sites. These content sites are for news, sports, entertainment, research, and social networking. They are supported by advertising placements, SUbscription (Wall Street Journal Online earns from both sources), sales of goods (for example, many medical newsletters), and subsidies from individuals and institutions. Not included here are the websites of enterprises in business, government, or academia that are included in segment 12.

8. Software as a Service (SaaS): This is a rapidly emerging segment of companies providing software to consumers and businesses, wherein the software and all customer input data are stored by the provider company, and accessed from anywhere by user company employees via the Internet. It is rapidly taking share from software that is typically purchased via license and run on users' computers. Now at about $6 billion, this segment is growing 15 percent or more a year. Salesforce.com is the largest independent pure SaaS company. But major licensed software companies like Oracle and SunGard are starting to offer some oftheir software using the SaaS

model. .

SaaS is distinct from the software segment (#4) in that it is a product that customers buy to improve their businesses, not software that makes the Internet function well.

9. Advertising Agencies and Ad Support Services: This segment includes advertising agencies and the services that support advertising, like independent web designers, web analytics companies, and market research companies. It makes up an important commercial segment of the Internet. Decades before the Internet existed, advertising became an important facilitator of other information and entertainment media, especially in the radio, newspaper, and television industries. Now advertising

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Attachment Page 3

2. The Advertising-Supported Internet

2.1 Internet Advertising Segments

The Internet system depicted in Exhibit 1-3 contains five commercially-oriented segments.

1. Advertising placed on content sites: Internet advertising dates back only a dozen years or so.

It grew rapidly in the late 1990s, but then declined for a few years as the dot.com bust dried up venture capital-backed advertising money. But in just seven years Internet advertising exclusive of search has grown from $6 billion in 2002 to $13 billion in 2007

Whatever form it takes-pop-up advertising, flash animation, video or banner advertisingpaid advertising on content sites is very similar to traditional TV, magazine and newspaper advertising, with two exceptions: it can increasingly be targeted to individual Internet users, based on information collected about or supplied by that user, and it routinely allows consumers to click through and receive deeper information from the advertiser. The ability to target and to give more information to consumers have been facilitating factors for the growth of Internet advertising.

2. Paid search: The most dramatic growth is in paid search. Paid search was less than $1 billion in 2002,and in 2007 was over $8 billion.12 A relatively small amount ofInternet advertising is currently targeted based on user profiles, but experts expect this to grow because of its greater effectiveness.

Search engines like Google, Yahoo, and Microsoft Network have almost become synonymous in users' minds with the Internet, or at least "getting on the Internet." The value of an ad coming up on the first page of a search was recognized early on, and the search engine companies have been able to monetize this value by charging to place relevant advertisements adjacent to search results. This is similar to the practices of the Yellow Pages, which list all full-page ads in a heading first, half-page ads next, and quarter-page ads third, based on research that showed early placement received the most phone calls. Search engines have also been funded heavily by banner and pop-up advertising targeted to Internet users searching particular types of sites.

3. e-Commerce: In 2007, the business-to-consumer (B2C) e-tailer segment grew six times faster than total retail sales, reaching $165.9 billion, which was up 21.8 percent from 200613• Still growing rapidly, e-commerce on the consumer side has its roots in catalog mail order and on the business side with EDI and EFT over private networks. By some measures, consumer e-commerce already comprises about 10 percent of all U.S. retailing. The volume of B2B e-commerce is much larger still, with about half of the $3.5 trillion of supply-chain purchases handled over the Internet.

E-commerce has proven to bean important area of small-business creativity and participation. While some of the big e-commerce players are conventional retailers (e.g., Sears and Staples), former catalog-only houses (Lands End and LL Bean), or large hard goods manufacturers (Apple and Dell), the biggest e-tailer, Amazon.com, started up only 13 years ago and in that time has created 17,000 jobs. Other top 20 e-tailers include very new medium-sized companies, including Newegg.com (1,500 employees), Netflix (1,500

12 "lAB InternetAdvertising Revenue Report, 2007 full Year Results" lAB, New York, May 2007 13 Internet Retailer's Top 500 guide

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employees) and Zappos.com (1,300 employees). 14 More significant is the estimated number of small e-tailers. Over half of e-tail employment is in small businesses that have grown up since the beginning of the dot.com era. eBay, a 13-year-old business has created 15,000 new jobs since 1995 and has spawned an industry of 4 million sellers on its auction system, with 120,000 of them relying on eBay as their primary or only source of income. IS

4. Websites ofbusinesses (or their products), government bodies, and non-profits: No one we could find has been able to provide numbers on how many U.S. businesses have websites. There are 20 million corporations and sole proprietorships in the U.S., ranging from WalMart, with 1.2 million U.S. employees, to self-employed tradespeople and one-person sales and service organizations Likely every business with over $5 million in sales has a website, simply because ofthe marketing and information value to customers, employees, and potential hires. Even hedge funds, known to be secretive about most of their affairs and especially their specific investment choices, have sites to explain their investment philosophy to potential investors.

This element may be the "hidden gold" of the Internet. Websites have displaced corporate product literature mailed in advance of a meeting, but they are becoming even richer in depth of information-sometimes using video-and in reaching out to the visitor to try to bring him or her into the "community" of users for that organization's goods or services. Also, these web sites, by using visitor registration, are becoming a linchpin for multi-channel marketing and advertising programs targeted at potential buyers.

5. E-mail marketing: E-mail is nearly universal: according to a recent Forrester study, 97 percent of consumers and 94 percent of marketers use it. Click-through rates on e-mail marketing messages are around 5 percent, which is a high rate for direct marketing and an indication of the high relevancy of these programs to consumers. 16 This high success is not surprising given that many e-mail programs depend on consumers to "opt-in" and affirm they want to receive e-mails from a company, and marketers allow consumers to "opt out." The lAB has calculated this form of advertising to be worth about $400 million in 2007, and to be growing at the rate of all interactive advertising. 17 However, EmailLabs has said that e-mail advertising expenditure is considerably higher. They projected $950 million in annual marketing spend on e-mail programs in 2006, up 7 percent from 2005. EmailLabs cited a Datran Media study indicating that 83.2 percent of marketers see e-mail as an important marketing tactic, compared to 36.2 percent for display advertising and 27.7 percent for traditional direct mail.

The e-mail category is not without its problems however. The high success rate for advertisers of this very inexpensive form of advertising has only encouraged more companies to offer it, and propelled a greater frequency of e-mails. In its annual survey of 10,000 Internet households, Forrester found that 71 percent of respondents in 2006 complained they receive too many e-mail offers and promotions, up from 44 percent in 2000. In 2006, 72 percent said they delete most e-mail advertising without reading it, up from 31 percent in 2000. Nevertheless, a substantial minority appreciates the availability of these offers.

Again, in 2006, 22 percent of Internet consumers said that e-mails are a "great way" to find

14 Internet Retailer's Top 500 guide

IS Washington Post article cited on Internet blog, Business and Money eCommerce, Number of Active eBay Sellers.

November 23, 2005, posting.

16 Shar VanBoskirk, .. E-mail Marketing comes of Age," Forrester Research, March 2, 2007 171 AB annual reports on interactive advertising, lAB website

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out about new products or promotions, 13 percent said they read most e-mail ads to see if something "catches my eye," and 5 percent said they often buy things advertised through email promotions. 18

To understand better the advertising-supported Internet, it is useful to place it against the backdrop of all marketing communications in the U.S. Notably, its share of U.S. advertising is about to reach 10 percent. As of 2008, it has surpassed radio and Yellow Pages and is in a close tie with magazines to be the third biggest advertising medium in the US.

But perhaps the bigger story is the share of all marketing communications the Internet represents, or, even more telling, is displacing, since Internet advertising, website promotion, e-commerce offers on the web, and e-mail offers are increasingly seen by marketers as cost-effective alternatives to print and television advertising. It is noteworthy that newspapers and Yellow Pages are in decline, two media that rely heavily on local advertising, at the same time that the fixed and mobile Internet are beginning to focus more and more on local advertising. These two print media are rapidly losing readership and usage, so their revenues will take even more hits in the future. Some TV viewership will switch to Internet viewing, particularly among the young viewers, which may erode some of the TV advertising numbers. On the marketing communications side, some direct-mail volume is being siphoned off by Internet e-commerce and by websites displacing some business mailings of literature. The Internet promises even to affect consumer sales promotions and incentives by virtue of the fact that these can be issued and used in e-commerce. In summary, the Internet has had a large impact on the advertising and marketing communications market and will likely have a much bigger impact in the future.

2.2 The value of the advertising-supported Internet

This report approaches the assessment of the economic value of the Internet in three ways:

• a value-add approach built up from known Internet employment,

• viewing the Internet as an island-like system exporting to the rest of the economy, and

• a valuation of the time that users spend on the Internet.

Employment-Based Approach to Valuing the Internet: A nation's gross domestic product (GDP) is the aggregate of incomes received by residents of the nation, both individual and corporate, as direct payment for current services to production, plus capital appreciation. 19 It is equal to the sum of the values added at each stage of production by the industries and productive enterprises located in, and making up, the country's domestic economy. The national GDP can be decomposed into sector GDPs, which, in the same spirit, measure the economic activity of each sector.

Our objective is to provide data that, together with reasonable assumptions, can be used to estimate the U.S. domestic economic activity attributable to the advertising-supported Internet. We have computed the number of people receiving direct salary payments for services to this sector at 1.2 million.

For each person directly employed in this sector, other people work in sectors that supply the sector or that benefit from retail and service sector spending by these workers. The sector also helps to

18 Shar VanBoskirk, "E-mail Marketing comes of Age," Forrester Research, March 2, 2007

19 Pearce, David W. (1994) The MIT Dictionary of Modem Economics. Cambridge, MA: The MIT Press.

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2007 Internet Revenues and Employees at Software as a Service (SaaS) companies

Total 2007 Co. 2007 Internet U.S. Internet

Company Headquarters Revs. ($ bil.) Revs. ($ bil.) Employees

Salesforce.com San Francisco, CA .75 .75 2,476
Digital River Eden Prairie, MN .35 .35 949
RightNow Tech. Bozeman, MT .11 .11 617
Epicor Sftwr. Irvine, CA .43 .09 581
Concur Tech. Redmond, WA .13 .13 546
Salary.com Waltham, MA .11 .11 443
Vocus Lanhan, MD .06 .06 341
NetSuite San Mateo, CA .11 .11 338
Taleo Dublin, CA .13 .13 328
Convio Austin, TX .04 .04 320
Workday, Inc. Walnut Creek, CA .02 .02 185
All Other 5.81 22,063
Total $7.70 31,487 3.11 Advertising Agencies and Ad Support Services

A key segment in the marketing-supported Internet is the advertising agencies that create advertising for their clients and then buy placement for it among online publishers and other Internet entities. There are many agencies specialized in the Internet, and the largest global agencies also have a number of acquisitions or home-grown groups that design online advertising. From what we can glean, these ad agencies design ads for both B2B and B2C advertisers.

The first group to consider is the specialist agencies, some of which are owned by large global agencies, as indicated.

2007 Internet Revenues and Employees at Specialist Interactive Ad Agencies*

Total.2007 Co. 2007 Internet U.S. Internet

Company Headquarters Revs. ($ bil.) Revs. ($ bil.) Employees

Digitas Boston, MA .43 .43 2,500
Sapient Corp. Cambridge; MA .16 .60 1,500
Razorfish Seattle, WA N.A. .30 1,150
Rapp Collins New York, NY N.A. .25 825
Ogilvy_ Inter. New York, NY .16 .. 20 500
IBM Interactive Chicago,IL .27 .. 27 475
Wunderman New York, NY .16 .16 400
AKQA San Francisco, CA .13 .13 274
Organic San Francisco, CA .13 .13 325
RIGA New York, NY .10 .10 250
#11 thru 50 NA 2.14 12,935
Total $9.64 26,074
.. * Companies, their headquarters, and their sales are provided m "Top50 Digital Agencies." For companies lackmg published employee numbers we are using the rate of25 people for every $10 million of ad revenue. Further detail on sources of revenue and employment data can be found in the Excel spreadsheet.

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2007 Internet Revenues and Employees at Large Global Ad Agencies*

Total 2007 Co. 2007 Internet U.S. Internet

Company Headquarters Revs. ($ bil.) Revs. ($ bil.) Employees

Omnicom New York, NY 12.65 0.76 6,000
WPPGroup London 12.38 0.75 6,000
Publicis Paris 6.38 0.40 3,000
Interpublic New York, NY 6.55 0.40 3,000
Total $2.31 18,000 Internet Revenues and Employees at Web Analytics and Marketing Research Companies Total 2007 Co. 2007 Internet U.S. Internet

Company Headquarters Revs. ($ bil.) Revs. ($ bi!.) Employees

Double Click/Google New York, NY .35 .35 850
Harris InteractivelHarris Rochester, NY .23 .2 818
Omniture Orem, UT .14 .1 713
Nielsen Online New York, NY .10 .1 500
ComScore Reston, VA .09 .0 452
All Other .30 .30 600
Total $1.0 3,333 3.12 Advertising Networks

As mentioned in Section 1.3, ad networks play an important function in bringing buyer and seller of ad space together. They do this by aggregating publishers, many of them small, and connecting them with advertisers through their ad agencies. eConsultant maintains a list of about 86 ad networks, many of which are quite smallr"

2007 Internet Revenues and Employees at Advertising Networks

Company Headquarters Total 2007 2007 U.S Internet

Company Revenues

Internet Revenues

Employees

(Sbillions) ($billions)
Value Click W Lake Village, CA 0.65 0.65 1,333
2417 WPP New York, NY 0.20 0.20 39
Platform AI AOL Baltimore, MD 0.27 0.27 270
Burst Media Burlington, MA 0.04 0.04 97
Tribal Fusion Emeryville, CA 0.03 0.03 70
Total I 1.19 1,533 36 eConsultant Technical Lists, http://lists.econsultant.comitop-lO-advertising-networks.htmIA website called LinkWorth also maintains a long list of ad networks: http://blog.linkworth.comla-nice-Iong-Iist-of-ad-networks/ HAMILTON CONSULTANTS

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3.13 E-mail Marketing and Support

E-mail campaigns, both B2C and B2B, have been growing rapidly, and most marketers see them as a useful customer acquisition and customer retention tool. DMnews.com reported in early 2007 a study by Datran in which 1,500 marketing professionals from 50 different companies were surveyed on their e-mail marketing intentions. The study found that 70 percent of the marketers planned to increase 2007 e-mail spending for customer acquisition, and 63 percent planned on increasing e-mail budgets for customer retention. EmailLabs, in its "Statistics and Metrics" section on its website, cited the same Datran Media survey wherein 83 percent of marketers surveyed said they view e-mail marketing as one of the most important advertising tactics they planned to use in 2007. This was a higher percentage than any other medium. EmailLabs also pointed to a Jupiter Research study stating that spending on e-mail campaigns would be $950 million in 2006, up from $885 million the

previous year." Projecting the same growth rate, 2007 spending would be $1.02 billion. .

Because most of the e-mail specialist marketing firms are privately owned, or divisions of larger companies which do not report results by division, it is hard to identify the revenues and employee counts of the significant firms. However, Hoover's has provided estimates for some ofthe oftmentioned specialists, and these happen to be very small companies; this suggests that all are fairly small companies. Many ad agencies also design and deliver e-mail campaigns as part of an integrated marketing campaign, and some are delivered in-house by enterprises as well as by ISPs. Marketingprofs.com in a prospectus for a conference on Digital Marketing in 2008 provides a list of over 80 e-mail marketing firms. We believe there may be 500 or more providers of e-mail campaigns if ad agencies and in-house are included.

There is general agreement that the total revenue for e-mail marketing efforts is around $1 billion. We have removed the e-mail marketing revenues from the Internet advertising revenues in 2007 of $21 billion, so they can be isolated here. This eliminates a potential source of double-counting. The employees are estimated from a weighted average of employees-to-revenue of the companies for which we have both revenue and employee data. Forrester labels it a fairly "mature" industry, even though there remains some room for growth.

We have tried to list all the major companies for which we could find revenue and employment data. Some are independent companies and some, like Epsilon Interactive and Yesmail, are divisions of larger companies. The revenues for each one of the e-mail marketers listed are fairly small-all are doing $50 million or less in annual revenue. CheetahMaii and Postfuture/Harte-Hanks are often mentioned as important players, but they are excluded, since Cheetahlvlail appears to be quite small. We could not separate out Postfuture numbers from aggregated Harte-Hanks information, but what we have from pre-acquisition years suggests that Postfuture has only $10-$15 million in sales.

2007 Internet Revenues and Employees at E-mail Marketing Companies*

Total 2007 Co. 2007 Internet U.S. Internet Revs. ($ bil.) Revs. ($ bil.) Employees

Headquarters

Company

New York, NY

.05 .04 350

Waltham, MA

.05 .05 318

37 EmailLabs, .. E-mail Marketing Statistics and Metrics, 2007

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Axciom Digital San Mateo, CA .03 .03 280
ExactTarget Indianapolis, IN .03 .03 268
Return Path New York, NY .02 .02 200
Responsys, Inc. San Bruno, CA . .02 .02 162
Yesmail (infoGROUP) Portland, OR .01 .01 128
e-Dialog Lexington, MA .01 .01 123
EmailLabs Menlo Park, CA .01 .01 114
Datran New York, NY .01 .01 95
Silverpop Atlanta, GA .01 .01 90
All Other N.A. .78 8,150
Total $1.02 10,278
.. .. . " * Emaill.abs In Its Statistics and Metrics on Its website cites a Jupiter Research study saying spendmg on e-mail campaigns would be $950 million in 2006, up from $885 million the year before. Projecting the same growth rate, 2007 spending would be $1.02 billion. The "all other" is a plug number of revenues to bring the total e-mail marketing revenues to $1.02 billion. "All other" employees are calculated using a factor of $95,701 in revenue per employee, determined by the composite numbers of 6 of the email marketers above that have fairly similar revenue/employee ratios.

3.14 Enterprise Involvement in Internet Advertising, Marketing and Web Design

Just about every larger business, government agency, or non-profit has a website. These sites help stakeholders--customers, distributors, investors, business partners, employees, and job applicantsunderstand the company or agency. These sites may be developed by ad agencies like Digitas and Razorfish, by web design firms, many of which are sole proprietorships, by in-house staffs in the larger companies, or even by departments in a few large companies, like IBM Global Services. The u.S. Department of Labor notes that 25 percent of graphic designers, of which web designers are a part, are self-employed."

Estimates of annual web development activity are hard to come by. One source puts the worldwide number of web sites at 108 million in 2007, up from 70 million in 2005.39 Worldwide, 38 million new sites were created in two years, although presumably many new ones were developed outside the u.S. in less mature markets. In addition to that activity, all websites are potentially in need of upgrade or enhancement every year. Clearly there is extensive web development, both for new and existing sites.

Because web development is scattered over so many firms and individuals, rather than build up employment from disaggregated numbers, we have instead tried to estimate the total number of web designers in the u.S. Web designers are counted in a broad Bureau of Labor Statistics category that includes computer systems analysts, database administrators, and computer scientists; these number some 1 million people in the u.S. The author ofa recent analysis suggested that 100,000 web designers within this group might be a safe estimate, given that so many other categories are covered. The analyst also pointed to an InfoWorld compensation survey in 2004 stating that the average web designer salary was $61,000. Given that billings to a web design client must include benefits, management, marketing, and other overhead, revenue per web designer of $150,000 seems a minimum, although in very small firms that might be too high. Combining these numbers, the

38 U.S. Department of Labor Occupational Outlook Handbook, Graphic Designers

39 "WWWFAQs,"Boutell.com, citing the Netcraft Web Server Surveys done in 2005 and 2007, February 15,2007

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Case No. S169195

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Attachment Page 10

4. Companies and Employment by Geography

4.1 Company headquarters and total employees by geography

In the previous section, wherever possible we identified the largest companies within each of the fourteen Internet segments. These encompass 700,000 of the 1.2 million U.S. Internet employees. Only company headquarters locations were listed, but many of these companies have employees, sometimes operating out of their homes, spread over many locations in the U.S. or overseas. (Of course, in cases like cable, telephone, hardware, IT consulting, large media, and large retailer companies, the majority of employees are working in areas that do not contribute to the Internet.) While it is simplistic to allocate these companies by geography based on just their headquarters locations, doing so nevertheless starts to paint a picture of both geographic diversity and intensity.

The distribution of these companies by state, listed in order of number of Internet employees, is shown below. The states are listed in order of the heaviest concentrations of Internet employees.

California

Company

Headquarters

Total 2007 Co. Total 2007 Revs. ($ bil.) Employees

U.S. Internet Employees

Cisco Systems Cupertino 34.02 61,535 24,614
Google Mountain View 16.59 16,805 15,124
Yahoo Sunnyvale 6.97 14,300 10,725
Hewlett Packard Palo Alto 104.29 17,200 10,122
Apple, Inc. Cupertino 24.01 21,600 7,835
Jupiter Networks Sunnyvale 2.84 5,879 2,940
McAfee Santa Clara 1.31 4,250 2,550
Salesforce.com San Francisco .75 2,606 2,476
Sun Microsystems Santa Clara 13.87 34,200 2,291
SAIC San Diego 8.94 43,800 2,190
Verisign Mountain View 1.50 4,251 2,085
Adobe Systems San Jose 3.16 6,959 2,088
Ask.comlIAC Oakland 6.37 17,000 2,025
Value Click Westlake Village .65 1,344 1,344
Other* 3.15 7,608 5,375
Total $228.42 90,415 * All other companies headquartered in California that are cited in this report.

New York

Company

Headquarters

Total 2007 Co. Total 2007 Revs. ($ bil.) Employees

U.S. Internet Employees

IBM Armonk 98.79 386,558 18,555
Time Warner Cable New York City 15.95 45,600 8,862
Verizon Comm. New York CttY_ 93.47 235,000 8,397
Omnicom New York CttY_ 12.69 6,108 HAMIL TON CONSULTANTS

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DECLARATION OF SERVICE

I declare that I am, and was at the time of service hereinafter mentioned, at least 18 years of age and not a party to the above-entitled action. I am employed in the City and County of San Francisco. My business address is 555 Mission Street, Suite 3000, San Francisco, 94lO5. On June 15,2009, I caused to be served the following documents:

BRIEF OF AMICI CURIAE EMAIL SENDER AND PROVIDER COALITION AND V ALUECLICK, INC.

IN SUPPORT OF DEFENDANTS AND APPELLANTS

by placing a true copy thereof in an envelope addressed to each of the persons named below at the address shown, in the following manner:

SEE ATTACHED SERVICE LIST

BY MAIL: I placed a true copy in a sealed envelope for . deposit in the U.S. Postal Service through the regular mail collection process at Gibson, Dunn & Crutcher LLP on the date indicated below. I am familiar with the firm's practice of collection and processing correspondence for mailing. It is deposited with the U.S. Postal Service on that same day in the ordinary course of business. I am aware that on motion of party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in the declaration.

Counsel

Attorneys For

Elaine T. Byszewski HAGENS BERMAN SOBOL SHAPIROLLP

700 S. Flower Street, Suite 2940 Los Angeles, CA 90017

Phone: (213) 330-7150

Fax: (213) 330-7152

Plaintiff & Appellant

1 Copy

Counsel

Reed Katherin

HAGENS BERMAN SOBOL SHAPIROLLP

425 2nd Street, Suite 500 San Francisco, CA 94107 Phone: (415) 896-6300 Fax: (415) 896-6301

Steve W. Berman

HAGENS BERMAN SOBOL SHAPIROLLP

1301 Fifth Avenue, Suite 2900 Seattle, WA 98101

Phone: (206) 623-7292

Fax: (206) 623-0594

Elizabeth L. McDougall Rebecca S. Engrav PERKINS COlE LLP

1201 Third Avenue, Suite 4800 Seattle, WA 98101-3099 Phone: (206) 359-8000

Fax: (206) 359-9000

Judith B. Gitterman PERKINS COlE LLP 1620 26th Street

6th Floor - South Tower

Santa Monica, CA 90404-4013 Phone: (310) 788-9900

Fax: (310) 788-3399

Attorneys For

Plaintiff & Appellant

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I certify under penalty of perjury that the foregoing is true and correct, that the foregoing document(s) were printed on recycled paper, and that this Certificate of Service was executed by me on June 1.52009, at San

Francisco, California. QA---

Robin McBain