EF CULTURAL TRAVEL BV v. EXPLORICA, INC.

COFFIN, Senior Circuit Judge.

Appellant Explorica, Inc. ("Explorica") and several of its employees challenge a preliminary injunction issued against them for alleged violations of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030.1 We affirm the district court's conclusion that appellees will likely succeed on the merits of their CFAA claim, but rest on a narrower basis than the court below.

I. Background

Explorica was formed in 2000 to compete in the field of global tours for high school students. Several of Explorica's employees formerly were employed by appellee EF, which has been in business for more than thirty-five years. EF and its partners and subsidiaries make up the world's largest private student travel organization.

Shortly after the individual defendants left EF in the beginning of 2000, Explorica began competing in the teenage tour market. The company's vice president (and former vice president of information strategy at EF), Philip Gormley, envisioned that Explorica could gain a substantial advantage over all other student tour companies, and especially EF, by undercutting EF's already competitive prices on student tours. Gormley considered several ways to obtain and utilize EF's prices: by manually keying in the information from EF's brochures and other printed materials; by using a scanner to record that same information; or, by manually searching for each tour offered through EF's website. Ultimately, however, Gormley engaged Zefer, Explorica's Internet consultant, to design a computer program called a "scraper" to glean all of the necessary information from EF's website. Zefer designed the program in three days.

The scraper has been likened to a "robot," a tool that is extensively used on the Internet. Robots are used to gather information for countless purposes, ranging from compiling results for search engines such as Yahoo! to filtering for inappropriate content. The widespread deployment of robots enables global Internet users to find comprehensive information quickly and almost effortlessly.

Like a robot, the scraper sought information through the Internet. Unlike other robots, however, the scraper focused solely on EF's website, using information that other robots would not have. Specifically, Zefer utilized tour codes whose significance was not readily understandable to the public. With the tour codes, the scraper accessed EF's website repeatedly and easily obtained pricing information for those specific tours. The scraper sent more than 30,000 inquiries to EF's website and recorded the pricing information into a spreadsheet.2

Zefer ran the scraper program twice, first to retrieve the 2000 tour prices and then the 2001 prices. All told, the scraper downloaded 60,000 lines of data, the equivalent of eight telephone directories of information.3 Once Zefer "scraped" all of the prices, it sent a spreadsheet containing EF's pricing information to Explorica, which then systematically undercut EF's prices.4 Explorica thereafter printed its own brochures and began competing in EF's tour market.

The development and use of the scraper came to light about a year and a half later during state-court litigation regarding appellant Olsson's departure from appellee EFICE. EF then filed this action, alleging violations of the CFAA; the Copyright Act of 1976, 17 U.S.C. § 101; the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961; and various related state laws. It sought a preliminary injunction barring Explorica and Zefer from using the scraper program and demanded the return of all materials generated through use of the scraper.

On May 30, 2001, the district court granted a preliminary injunction against Explorica based on the CFAA, which criminally and civilly prohibits certain access to computers. See 18 U.S.C. § 1030(a)(4). The court found that EF would likely prove that Explorica violated the CFAA when it used EF's website in a manner outside the "reasonable expectations" of both EF and its ordinary users. The court also concluded that EF could show that it suffered a loss, as required by the statute, consisting of reduced business, harm to its goodwill, and the cost of diagnostic measures it incurred to evaluate possible harm to EF's systems, although it could not show that Explorica's actions physically damaged its computers. In a supplemental opinion5 the district court further articulated its "reasonable expectations" standard and explained that copyright, contractual and technical restraints sufficiently notified Explorica that its use of a scraper would be unauthorized and thus would violate the CFAA.

The district court first relied on EF's use of a copyright symbol on one of the pages of its website and a link directing users with questions to contact the company,6 finding that "such a clear statement should have dispelled any notion a reasonable person may have had that the `presumption of open access' applied to information on EF's website." The court next found that the manner by which Explorica accessed EF's website likely violated a confidentiality agreement between appellant Gormley and EF, because Gormley provided to Zefer technical instructions concerning the creation of the scraper. Finally, the district court noted without elaboration that the scraper bypassed technical restrictions embedded in the website to acquire the information. The court therefore let stand its earlier decision granting the preliminary injunction. Appellants contend that the district court erred in taking too narrow a view of what is authorized under the CFAA and similarly mistook the reach of the confidentiality agreement. Appellants also argue that the district court erred in finding that appellees suffered a "loss," as defined by the CFAA, and that the preliminary injunction violates the First Amendment.

II. Standard of Review

A district court may issue a preliminary injunction only upon considering "(1) the likelihood of success on the merits; (2) the potential for irreparable harm if the injunction is denied; (3) the balance of relevant impositions ...; and (4) the effect (if any) of the court's ruling on the public interest." Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1st Cir.1996). Appellants challenge only the district court's finding that appellees are likely to succeed on the merits, and we thus confine our review to that factor. As in any other appeal, we review the merits of a preliminary injunction depending on the issue under consideration. "Generally speaking, pure issues of law (e.g., the construction of a statute) are reviewed de novo, findings of fact for clear error, and `judgment calls' with considerable deference...." Langlois v. Abington Hous. Auth., 207 F.3d 43, 47 (1st Cir.2000). Each of these is applicable here, where the district court's judgment relied on both its analysis of the CFAA and its assessment of the voluminous documentary evidence.

III. The Computer Fraud and Abuse Act

Although appellees alleged violations of three provisions of the CFAA, the district court found that they were likely to succeed only under section 1030(a)(4).7 That section provides

18 U.S.C. § 1030(a)(4).8

Appellees allege that the appellants knowingly and with intent to defraud accessed the server hosting EF's website more than 30,000 times to obtain proprietary pricing and tour information, and confidential information about appellees' technical abilities. At the heart of the parties' dispute is whether appellants' actions either were "without authorization" or "exceed[ed] authorized access" as defined by the CFAA.9 We conclude that because of the broad confidentiality agreement appellants' actions "exceed[ed] authorized access," and so we do not reach the more general arguments made about statutory meaning, including whether use of a scraper alone renders access unauthorized.10

A. "Exceeds authorized access"

Congress defined "exceeds authorized access," as accessing "a computer with authorization and [using] such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter." 18 U.S.C. § 1030(e)(6). EF is likely to prove such excessive access based on the confidentiality agreement between Gormley and EF. Pertinently, that agreement provides:

The record contains at least two communications from Gormley to Zefer seeming to rely on information about EF to which he was privy only because of his employment there. First, in an email to Zefer employee Joseph Alt exploring the use of a scraper, Gormley wrote: "[m]ight one of the team be able to write a program to automatically extract prices ... ? I could work with him/her on the specification." Gormley also sent the following email to Zefer employee John Hawley:

This documentary evidence points to Gormley's heavy involvement in the conception of the scraper program. Furthermore, the voluminous spreadsheet containing all of the scraped information includes the tour codes, which EF claims are proprietary information. Each page of the spreadsheet produced by Zefer includes the tour and gateway codes, the date of travel, and the price for the tour. An uninformed reader would regard the tour codes as nothing but gibberish.11 Although the codes can be correlated to the actual tours and destination points, the codes standing alone need to be "translated" to be meaningful.

Explorica argues that none of the information Gormley provided Zefer was confidential and that the confidentiality agreement therefore is irrelevant.12 The case on which they rely, Lanier Professional Services, Inc. v. Ricci, 192 F.3d 1, 5 (1st Cir.1999), focused almost exclusively on an employee's non-compete agreement. The opinion mentioned in passing that there was no actionable misuse of confidential information because the only evidence that the employee had taken protected information was a "practically worthless" affidavit from the employee's successor. Id. at 5.

Here, on the other hand, there is ample evidence that Gormley provided Explorica proprietary information about the structure of the website and the tour codes. To be sure, gathering manually the various codes through repeated searching and deciphering of the URLs13 theoretically may be possible. Practically speaking, however, if proven, Explorica's wholesale use of EF's travel codes to facilitate gathering EF's prices from its website reeks of use — and, indeed, abuse — of proprietary information that goes beyond any authorized use of EF's website.14

Gormley voluntarily entered a broad confidentiality agreement prohibiting his disclosure of any information "which might reasonably be construed to be contrary to the interests of EF."15 Appellants would face an uphill battle trying to argue that it was not against EF's interests for appellants to use the tour codes to mine EF's pricing data. See Anthony's Pier Four, Inc. v. HBC Assoc., 411 Mass. 451, 471, 583 N.E.2d 806, 820 (1991) (imposing a duty of good faith and fair dealing in all contracts under Massachusetts law). If EF's allegations are proven, it will likely prove that whatever authorization Explorica had to navigate around EF's site (even in a competitive vein), it exceeded that authorization by providing proprietary information and know-how to Zefer to create the scraper.16 Accordingly, the district court's finding that Explorica likely violated the CFAA was not clearly erroneous.

B. Damage or Loss under section 1030(g)

Appellants also challenge the district court's finding that the appellees would likely prove they met the CFAA's "damage or loss" requirements. Under the CFAA, EF may maintain a private cause of action if it suffered "damage or loss." 18 U.S.C. § 1030(g). "Damage" is defined as "any impairment to the integrity or availability of data, a program, a system, or information that ... causes loss aggregating at least $5,000 in value during any 1-year period to one or more individuals...." 18 U.S.C. § 1030(e)(8). "Loss" is not defined.

The district court held that although EF could not show any "damage" it would likely be able to show "loss" under the statute. It reasoned that a general understanding of the word "loss" would fairly encompass a loss of business, goodwill, and the cost of diagnostic measures that EF took after it learned of Explorica's access to its website.17 Appellants respond that such diagnostic measures cannot be included in the $5,000 threshold because their actions neither caused any physical damage nor placed any stress on EF's website.

Few courts have endeavored to resolve the contours of damage and loss under the CFAA. See, e.g., Shaw v. Toshiba Am. Info. Sys., 91 F.Supp.2d 926 (E.D.Tex. 1999) (noting the paucity of decisions construing the Act). Two district courts that have addressed the issue have found that expenses such as those borne by EF do fall under the statute. In Shurgard Storage Centers v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121 (W.D.Wa.2000), the district court found that the need to assess whether a defendant's actions compromised the plaintiff's computers was compensable under the CFAA because the computer's integrity was called into question. The court based its finding on the legislative history of the 1996 amendments to the CFAA:

We agree with this construction of the CFAA. In the absence of a statutory definition for "loss," we apply the well-known rule of assigning undefined words their normal, everyday meaning. See Inmates of Suffolk Cty. Jail v. Rouse, 129 F.3d 649, 653-54 (1st Cir.1997). The word "loss" means "detriment, disadvantage, or deprivation from failure to keep, have or get." The Random House Dictionary of the English Language 1137 (2d ed.1983). Appellees unquestionably suffered a detriment and a disadvantage by having to expend substantial sums to assess the extent, if any, of the physical damage to their website caused by appellants' intrusion. That the physical components were not damaged is fortunate, but it does not lessen the loss represented by consultant fees. Congress's use of the disjunctive, "damage or loss," confirms that it anticipated recovery in cases involving other than purely physical damage. But see In re Intuit Privacy Litig., 138 F.Supp.2d 1272, 1281 (C.D.Ca.2001) (loss means "irreparable damage" and any other interpretation "would render the term `damage' superfluous"); Register.com, Inc. v. Verio, Inc., 126 F.Supp.2d 238, 252 n. 12 (S.D.N.Y. 2000) (lost business or goodwill could not constitute loss absent the impairment or unavailability of data or systems). To parse the words in any other way would not only impair Congress's intended scope of the Act, but would also serve to reward sophisticated intruders. As we move into an increasingly electronic world, the instances of physical damage will likely be fewer while the value to the victim of what has been stolen and the victim's costs in shoring up its security features undoubtedly will loom ever-larger. If we were to restrict the statute as appellants urge, we would flout Congress's intent by effectively permitting the CFAA to languish in the twentieth century, as violators of the Act move into the twenty-first century and beyond.

We do not hold, however, that any loss is compensable. The CFAA provides recovery for "damage" only if it results in a loss of at least $5,000. We agree with the court in In re DoubleClick Inc. Privacy Litigation, 154 F.Supp.2d 497 (S.D.N.Y. 2001), that Congress could not have intended other types of loss to support recovery unless that threshold were met. Indeed, the Senate Report explicitly states that "if the loss to the victim meets the required monetary threshold," the victim is entitled to relief under the CFAA. S. Rep. 104-357, at 11. We therefore conclude that expenses of at least $5,000 resulting from a party's intrusion are "losses" for purposes of the "damage or loss" requirement of the CFAA.

IV. Conclusion

For the foregoing reasons, we agree with the district court that appellees will likely succeed on the merits of their CFAA claim under 18 U.S.C. § 1030(a)(4). Accordingly, the preliminary injunction was properly ordered.

Affirmed.