Internet postings targeted in court

At stake is anonymity of those who make disparaging remarks


A Maryland appeals court will hear arguments today in a case that could help determine whether someone who makes an anonymous -- and disparaging -- Internet posting in chat rooms or on message boards could be unmasked.

A decision could add to an emerging body of law shaping free-speech boundaries in the Internet age, when people using screen names as aliases regularly gripe online about politicians, employers and investments.

The area is of great concern on Wall Street, where online postings have affected stock prices and tarnished corporate reputations.

The case stems from efforts by an Arizona drug company to obtain the names of subscribers to a financial newsletter based in Rockville, in hopes that those people might lead to others who allegedly defamed the company online.

The newsletter's publisher, Timothy M. Mulligan, is fighting the subpoena with the help of the American Civil Liberties Union, the Electronic Privacy Information Center, Public Citizen and other advocacy groups.

Courts across the country have addressed John Doe subpoenas, which are used to elicit the names of those making anonymous Internet postings, and have come to differing conclusions.

The case is the first in the state to touch on the issue, albeit tangentially, said Paul Levy, an attorney for Public Citizen who has been involved in more than a dozen cases nationwide. A decision could take months.

Tracing a tradition of anonymity in American life to the backers of the Constitution who used pseudonyms, the ACLU argued with the other groups in an amicus brief that the First Amendment protects the rights of readers as well as the right to speak in cyberspace without identifying oneself and without fear of retaliation.

Lawyers on both sides of the subpoenas agree that a courtroom process is needed to determine when identities should be revealed. The disagreement lies in defining the standards that should be met for an unmasking.

"Anonymity is a part of American culture, I'll give you that," said Bruce D. Fischman, a Miami attorney who has represented Walgreens Co., HealthSouth Corp. and other companies in defamation lawsuits over Internet postings. "But there is another side of the equation, and that is that people are getting hurt, and there should be a process in place to bring those people who are hurting them to justice."

With the rise of financial discussion boards on Yahoo, Motley Fool and Silicon Investor, companies say, they are at risk of speculators manipulating their stocks, competitors maligning them online and employees revealing trade secrets or proprietary information -- all anonymously.

Political message boards have also proliferated and have reshaped the way campaigns are conducted.

Joseph F. Steffen Jr., a former aide to Republican Gov. Robert L. Ehrlich Jr., resigned last winter after it was learned that he had posted derogatory messages on the Internet about the personal life of Baltimore Mayor Martin O'Malley, a Democrat who has since declared his candidacy for governor.

In the case involving Mulligan, Phoenix-based Matrixx Initiatives Inc. says it has been the target of negative and false comments on discussion boards from people using screen names such as "TheTruthseeker."

The company says the postings are part of a scheme to sell the stock short. Someone would profit from a drop in a stock price when selling short, which involves borrowing stock, then repaying with shares bought at a lower price.

In a defamation lawsuit filed in Arizona in 2002, the company named two dozen John and Jane Does as defendants.

Matrixx has become embattled in litigation over its Zicam Cold Remedy nasal gel, which users have said caused permanent loss of smell and taste. The company says the claims are unfounded and that independent medical experts have conducted studies supporting that view.

More than 350 people have filed dozens of lawsuits, including a class action suit that has been dismissed, according to the company.

Matrixx stock, which reached $36 about 18 months before the Internet postings began, closed yesterday at $16.50.

While trying to uncover the names of defendants, Matrixx came across "The Eyeshade Report," written and published by Mulligan. The company says statements in a report about Matrixx "bear a striking resemblance" to the statements made online. Matrixx says Mulligan's report was "misleading" but has not named him as a defendant in the Arizona suit.

Mulligan said he wasn't aware of the Zicam suits. His report covered what he thought were aggressive accounting tactics and other potential problems, he said. His clients are mostly hedge funds, and a subscription to the report costs up to $10,000 a year.

"All they're trying to do is to shut up critics who found out unflattering things about them," Mulligan said.

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