While pursuing a number of copyright infringement claims, the Embroidery Software Protection Coalition (ESPC) stumbled across an online hobbyist forum.

The forum encouraged users to discuss embroidery-related topics, including the ESPC's infringement lawsuits, which forum participants heavily criticized. In particular, one anonymous user wrote, “the attorney for the plaintiff obtains default judgments without the defendant ever receiving notice of the lawsuit that was filed.”

The ESPC, which is a trade group of embroidery software companies, considered such statements defamatory. So on June 2006 it subpoenaed the site's ISP for the identities of the anonymous members. That caught the attention of the Electronic Frontier Foundation (EFF), a First Amendment rights group, which sought to quash the subpoena.

“Courts have held in the past that the First Amendment does protect the right to speak and associate anonymously,” says Corynne McSherry, an EFF staff attorney.

At press time, the ESPC was considering withdrawing its subpoena.

As the group is discovering, suing online defamers is not easy. Moreover, advances in Internet technology, including message boards, blogs and social networking sites, have increased defamation online. In-house counsel can't possibly monitor every comment. Rather than fight a losing battle against online speech, experts suggest finding creative ways to join in the online chatter.

“Whether participation equates to reading online communications or becoming actively involved is a decision that in-house counsel will have to make,” says Denise Howell, a lawyer and author of the “Bag and Baggage” legal blog. “Barring participation, I don't think there is any way to deal with this issue.”

Litigation Breakdown

There are a number of reasons why filing a lawsuit is no longer an effective way to stop defamation on the Internet.

First, the advent of blogs and social networking sites offers millions of users a platform for their opinions. According to Technorati, a blog search engine, there are more than 50 million blogs. Myspace, a social networking site, claims more than 100 million users. As a result, is it virtually impossible for companies to effectively monitor all of these platforms for defamatory speech.

“These issues are only going to explode as everyone gains an online presence,” says Martin Samson, a partner at Phillips Nizer in New York. “In-house counsel will wonder how on earth they are going to monitor this issue, which in the past rarely occurred.”

Second, because users can easily transfer information from one Web site to another, successfully litigating one defamation claim doesn't rid cyberspace of the statement.

“Comments can be copied and pasted to other sites, and entire Web sites can be mirrored elsewhere,” says Evan Brown, an associate at Hinshaw & Culbertson. “The reality is that deleting a defamatory statement across the entire Internet might be impossible.”

Finally, 24 states have enacted anti-SLAPP (Strategic Lawsuits Against Public Participation) laws. These laws make it more difficult to bring a defamation claim by providing defendants with a special motion that stays all discovery until the court assesses the claim.

“Anti-SLAPP statutes essentially cut the lawsuit off early,” McSherry says. “The defendant can say, 'This is a SLAPP suit,' and it puts the burden on the other side to prove it's not.”

Going Online

Because litigation is no longer an effective means to combat defamation on the Web, experts suggest companies create a presence on the Internet.

“By participating online, you're going to be much more aware of what the public is saying about your company,” Howell says. “You will also be able to more effectively address damaging statements.”

Participation can take several forms. First, companies can post responses to negative comments on Internet message boards and blog comment pages.

“Sometimes these misperceptions can be remedied by making a consistent, principled response,” Brown says. “Legal should sit down with the marketing department and draft a response refuting the poster's claims.”

A more proactive method of participation is a company-hosted blog where employees can write on topics ranging from new innovations to corporate policy. This allows the company to voice its opinions before the anonymous posters do. The public can comment on these blogs, giving the company full control over the comments.

“Corporate blogs allow the public to go directly to the company to air their grievances,” Howell says. “This way, companies can engage the person directly.”

Twenty-nine of the Fortune 500 companies are already blogging, according to Socialtext, a provider of enterprise wikis. These include Microsoft Corp., Intel Corp. and IBM Inc. Sun Microsystems Inc. recently became the first company to have its general counsel, Mike Dillon, publicly blog.

Hiding Identity

Companies that still wish to sue may run into one more hurdle. To file a suit, you first need to identify the defendant. Traditionally companies have unmasked anonymous posters by subpoenaing ISPs. However, with the rise of municipal Wi-Fi and public hotspots, not even an ISP will be able to reveal a user's identity. Public Wi-Fi networks assign users a shared IP address, which ISPs can't trace to the original user. Technology research firm Gartner Group estimates that by 2007 there will be 191,280 hotspots.

“Wi-Fi networks are going to lead to an enormous amount of anonymous defamation,” says Karl Kronenberger, a San Francisco-based attorney who specializes in Internet law. “What we see now really is the tip of the iceberg.”

In-house counsel need to act now to address this looming problem. For many, this means thinking outside the box.

“This is not something that in-house counsels' past experiences will prepare them for,” Samson says. “They are going to have to think creatively.”